June inflation softened to 22-month low of 2.7%

Inflation rate in June eased to a 22-month low of 2.7 percent from 3.2 percent in May on continuing softer price adjustments in some commodity groups such as food and non-alcoholic beverages, the Philippine Statistics Authority said Friday.

The June inflation was significantly slower than 5.2 percent registered a year ago. It was also the slowest in 22 months since it settled at 2.6 percent in August 2017.

This brought inflation in the first half of 2019 to 3.4 percent, or within the government’s target range of 2 percent to 4 percent.

“We still need to caution against upside risks, including weather-related shocks and uncertainties in the global oil market,” National Economic and Development Authority director-general Ernesto Pernia said.

Pernia said the entry of more rice imports helped stabilize food prices.  “We continue to experience the effects of the administrative measures the government had set in motion starting late last year. Further, the implementation of the Rice Tariffication Law allowed the entry of ample imported rice into the country that helped bring rice prices down,” he said.

“Since the effectivity of the law, private traders have applied for the sanitary and phytosanitary import clearances of 1.26 million metric tons of rice imports from the Bureau of Plant and Industry. Of these, 576, 000 MT have already arrived in the Philippines as of June 7, 2019,” he said.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the 2.7-percent inflation in June was consistent with the regulator’s assessment that inflation would firmly settle within the target range of 2 to 4 percent for 2019 and 2020.

“The BSP will keep close watch over latest economic developments to ensure that the monetary policy stance remains consistent with the BSP’s price stability objective while being supportive of economic growth,” Diokno said.

ING Bank Manila senior economist Nicholas Mapa said with inflation well-within target, the BSP would likely look to “tap on the accelerator once more after having slammed hard on the brakes in the previous year. ING is penciling in a policy rate cut by the BSP at its August meeting should inflation continue to show it will remain within target and second-quarter growth is projected to be soft.”

The benign inflation environment compelled the Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, to keep the benchmark policy rates steady at 4.5 percent on June 20. 

Pernia said the slower inflation comes with the optimism that the quality of life will improve along with the economy’s robust growth. 

“The government will continue putting in place preemptive measures to mitigate the impact of weather-related shocks and uncertainties in the international oil market. The government will also implement measures to prevent the spread of the African swine fever in the country while moderating its effects on inflation,” he said.

“We note that the prevalence of adverse weather conditions in the country remains an upside risk to inflation, especially with the start of the rainy season. We should prepare for the possible onslaught of nine to 13 typhoons in the coming months, as well as the above-normal amount of rainfall brought by the southwest monsoon or habagat. On the other hand, the weak El Niño phenomenon has been forecast to persist until August 2019, with a chance to continue until the first quarter of 2020,” he said.

“We reiterate our call to beef up production support and farm recovery programs in areas affected by El Niño. We also pitch for an assessment on the vulnerability and sustainability of farm areas to ensure that farming activities are adaptive to the environment and resilient to weather disturbances,” said Pernia.

Topics: inflation rate , Philippine Statistics Authority , National Economic and Development Authority , Ernesto Pernia , Rice Tariffication Law
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