CONSUMER prices likely stabilized further in May as inflation continued to benefit from base effects from last year and the low prices of oil and food.
Most analysts polled by the Inquirer last week said inflation likely slowed down from 2.2 percent in April, which was the slowest in a year and a half. This was in line with the Bangko Sentral ng Pilipinas’ (BSP) own forecast for the month of 1.6 to 2.4 percent.
Inflation may continue to slow in the coming months as fuel stays cheap and as anemic global economic conditions keep commodity prices low.
“I don’t think it’s the bottom yet. There won’t be runaway inflation,” Security Bank’s Rafael Algarra said in an interview. For May, Security Bank sees inflation at 2 percent.
Other projections are as follow: Banco de Oro Unibank, 2.19 percent; Bank of the Philippine Islands (BPI), 1.9 percent; Moody’s Analytics, 2.2 percent, and Singapore’s DBS, 2 percent.
“We should see prices in the Philippines gradually trend higher over 2015 on the back of solid domestic demand,” Moody’s Analytics economist Katrina Ell said.
For all of this year, the BSP expects inflation to average near the low end of the target range of 2 to 4 percent. With low inflation and slow economic growth, the possibility of policy loosening by the central bank has improved, some said.
The BSP’s main goal is to protect consumers’ purchasing power by keeping prices stable.
“The risk of monetary tightening has reduced considerably. Our view is there won’t be any more movement for the rest of the year, although the bias is to some form of loosening,” Algarra said, noting the need for monetary stimulus should the economic slowdown persist.
For the first quarter of 2015, growth slowed to 5.2 percent, down from 5.6 percent in the same three-month period in 2014.
BPI lead economist offered a different view, saying the central bank might tighten policy settings before year’s end.
“The negative contribution from declining oil prices will diminish significantly,” he said.