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May inflation could slow on lower oil, food prices–BSP

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THE Bangko Sentral ng Pilipinas (BSP) said the country’s inflation for May could slow to its lowest rate in 12 months at 5.8 percent on the back of lower prices of oil, fish and chicken.

The BSP projected that the inflation for May could settle within the range of 5.8 percent to 6.6 percent.

The BSP identified higher prices of rice, vegetable and other key food items coupled with the increase in LPG and Meralco electricity rates as the “primary” sources of upward price pressures.

“Meanwhile, the cumulative rollback in domestic petroleum prices as well as lower poultry and fish prices and electricity rates of various regional power distributors could lead to lower inflation in May,” the BSP said in its month-ahead inflation report.

The BSP said it will continue to “monitor” developments that could affect its outlook for inflation and growth “in line with its data-dependent approach to monetary policy formulation.”

BSP Governor Felipe M. Medalla earlier said that the central bank is expecting the country’s headline inflation to be within its target range as early as September due to easing of prices of goods and services.

“Our forecast is that by September or October, the headline inflation on a year-on-year basis will be below 4 percent unless there are new developments,” Medalla told reporters in an interview last Monday in Taguig City.

The national government’s inflation target is between 2 and 4 percent. (Related story: https://businessmirror.com.ph/2023/05/30/bsp-sees-inflation-within-target-range-by-september/)

Medalla said the government’s anti-inflation measures, which involved monetary and non-monetary actions, are already working, as exemplified by the downward trend in the country’s inflation rate.

Medalla explained that the BSP has observed that headline inflation, on a month-on-month basis, has been stagnant or near zero since January.

“At least from one month to the next, inflation is now moving that much. Of course, that will be the temporary effect of already high prices, but once that is gone, it will normalize,” he said.

“The decision of the government to relax the importation of goods with short supply contributed to that, plus the fact that our higher policy rates also began to work,” he added.

Medalla added that the BSP sees no more lingering supply shocks that could impact the prices of goods in the country.

The country’s improving inflation situation encouraged the BSP last month to pause its aggressive monetary policy tightening campaign. (Related story: https://businessmirror.com.ph/2023/05/19/bsp-pauses-interest-rate-hikes-as-inflation-cools-and-consumer-demand-eases/)

The BSP earlier said it expects inflation to average 5.5 percent this year, lower than the February estimate of 6.1 percent.

The increase in commodity prices is also expected to average 2.8 percent in 2024, slower than the 3.1 percent estimate made in the last monetary policy report.

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