Inflation rate in May rose to a five-year high of 4.6 percent from 4.5 percent in April and 2.9 percent a year ago, on higher prices of alcoholic beverages and tobacco, data from the Philippine Statistics Authority show.
The National Economic and Development Authority said the higher inflation in May was also driven by higher rice, corn, fish and personal transport prices on the back of rising world crude prices.
“The increase in the international oil prices beyond the programmed level of $60 per barrel contributed 0.5 percentage points to the overall inflation rate in May 2018. This means that for every additional peso due to inflation, one pays 11 centavos more,” Neda said.
The government’s economic managers said the implementation of the Tax Reform for Acceleration and Inclusion law contributed only 0.4 percentage point to the overall inflation. “That amounts to 9 centavos for every additional peso due to inflation,” Neda said.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said while the inflation outlook remained a concern, “there are also signs that inflation is slowing and may be close to peak.”
Budget Secretary Benjamin Diokno said month-on-month inflation actually decelerated to 0.2 percent in May from 0.3 percent in April and 0.7 percent in March.
“We expect this to further taper in the second half of the year,” Diokno said, adding that the expected decrease in the price of world crude oil and the increase in buffer stocks of rice would likely moderate the inflation rate.
Data from the PSA showed that on a year-on-year basis, the prices of alcoholic beverages and tobacco jumped 20.5 percent; transport, 6.2 percent; furnishing, household equipment and routine maintenance of the house, 2.9 percent; and restaurant and miscellaneous goods and services, 3.7 percent.
A slower annual rate of increase was recorded in food and non-alcoholic beverages index at 5.7 percent. The rest of the commodity groups retained their previous month’s growths.
Excluding selected food and energy items, core inflation picked up to 3.6 percent in May from 3.5 percent in April and 2.7 percent a year ago.
Inflation in the first five months averaged 4.1 percent, higher than the upper limit of the government’s 2018 target range of 2 percent to 4 percent.
ING Bank Manila senior economist Joey Cuyegkeng said inflation in May reduced the pressure on the Bangko Sentral to hike policy rate later this month.
“We believe that recent developments would mean that inflation is at or near the peak. These developments also cut the pressure on BSP to hike policy rates this month. However, we still expect BSP to hike policy rates at the June 21 meeting to pre-empt second round effects and stabilize inflation expectations,” Cuyegkeng said.
SB Equities Inc. said inflation was expected to remain above the government’s target range for the remainder of the year and the Bangko Sentral to raise the policy rate by another 25 basis points in the third quarter.
The PSA said month-on-month seasonally adjusted inflation continued to decelerate.
“It helps that oil prices seem to have peaked and food price inflation is also slowing down. On the other hand, inflation is still accelerating outside NCR,” Espenilla said.
Espenilla said the Monetary Board, the policy-making body of the Bangko Sentral, would consider if further adjustments would be necessary to firmly anchor inflationary expectations and ensure that the inflation target would be achieved in 2019.