The Bangko Sentral ng Pilipinas said Wednesday it will review its monetary policy after inflation rate climbed to a five-year high of 5.2 percent in June from 4.6 percent in May.
The June figure was the highest inflation rate in more than five years since the Philippine Statistics Authority used the 2012 consumer price index. It was also faster than 2.5 percent registered in the same month last year.
Data showed that inflation averaged 4.3 percent in the first half, beyond the target range of 2 percent to 4 percent for 2018.
Bangko Sentral Governor Nestor Espenilla Jr. described the higher-than-expected June inflation as a “setback.”
“We will review and update our situational assessment and forecast inflation path. This will shape the strength and timing of our next monetary policy response to firmly anchor inflation expectations,” Espenilla said in a statement.
He said the Bangko Sentral “re-affirms its strong commitment to ensure that inflation returns to within the 2 to 4 percent target range as soon as possible.”
Finance Secretary Carlos Dominguez III said his agency would “consider a proposal to remove tobacco products from the basket of goods.”
Economic Planning Secretary Ernesto Pernia said the government remained hopeful that inflation would be kept at bay and taper off by year-end.
“While we recognize the public sentiment on rising prices, let us remind ourselves that the Train [Tax Reform for Acceleration and Inclusion] law increased the take-home pay of 99 percent of income taxpayers. And this should help in coping with the rising prices of goods,” Pernia said.
“We expect inflation to peak in the third quarter and taper off by October. The government needs to implement necessary measures, both short-term and long-term, to address the impact of inflation,” Pernia said.
He said an important and urgent challenge to manage inflation was to increase the supply of goods and services, especially rice which was taking up a large chunk of the food budget of poor families.
Data from the PSA showed that the faster June inflation was primarily brought about by higher annual price increases in the heavily-weighted food and non-alcoholic beverages index at 6.1 percent.
Faster annual increments were also registered in the indices of alcoholic beverages and tobacco at 20.8 percent; housing, water, electricity, gas and other fuels, 4.6 percent; furnishing, household equipment and routine maintenance of the house, 3 percent; transport, 7.1 percent; communication, 0.4 percent; and education, 4 percent.
The food index alone went up by 5.8 percent in June, with higher annual mark-ups observed in the indices of rice, 4.7 percent; corn, 14.1 percent; meat, 5 percent; and vegetables, 8.6 percent.
Core inflation, which excludes selected food and energy items, also rose to 4.3 percent in June from 3.6 percent in May and 2.1 percent a year ago.
ING Bank Manila senior economist Joey Cuyegkeng said the high inflation point for June would likely require further monetary policy response as early as August.
“Real policy rate is deeper in the red indicating that a more aggressive economic policy response would be needed. Real policy rate is now -1.7 percent from -0.4 percent only in January,” Cuyegkeng said.