Central bank economists expect prices of goods and services to have risen at a more rapid clip in May as higher cost of fuel and rice pushed up the inflation rate across more sectors of the Philippine economy.
In a statement, the Department of Economic Research of the Bangko Sentral ng Pilipinas said it projects the inflation rate for last month to settle within the 4.6-5.4 percent range — higher that the April inflation rate of 4.5 percent which was a five-year high.
“Higher domestic petroleum prices amid geopolitical tensions in the Middle East as well as the sustained increase in rice prices present upward price pressures for the month,” the central bank economists said.
They explained, however, that the higher fuel and rice prices could be partly offset by lower electricity rates in areas served by the Manila Electric Co. along with lower prices of selected fruits and fish items as supply conditions normalized for the month.
The central bank raised interest rates by 25 basis points in early May — the first rate hike since September 2014 — in what was widely seen as a belated attempt to cap the inflation rate caused by rising crude oil prices internationally and aggravated by the tax hikes of the Duterte administration implemented this year.
Top BSP officials had originally justified their decision to stand pat on interest rates by saying that the inflation rate would correct itself by next year. More recently, however, the central bank has been highlighting its more hawkish language and stressing that it would not hesitate to tighten monetary policy further if it sees additional signs that price increases are becoming more broad based.
Many bankers and analysts now expect the central bank’s policy making Monetary Board to hike its key overnight borrowing rate — on which banks base their commercial loan prices — by at least another 25 basis points this year.
“Going forward, the BSP will remain watchful of evolving price trends and ensure that the monetary policy stance remains appropriate to maintain price stability that is conducive to a balanced and sustainable economic growth,” central bank economists said in their statement. /je