5-year high inflation may be ‘close to peak,’ says BSP chief

The agency responsible for keeping the inflation rate in check said it remains worried about rising prices of basic goods and services going forward despite the government’s announcement on Tuesday of a slower-than-expected pace of acceleration for May.

At the same time, however, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. held out hope that the country’s struggle against spiking consumer prices — now on its sixth month — may be nearing an inflection point after state data showed last month’s inflation rate at 4.6 percent.

The latest figure is still the highest in at least five years (as the government does not provide earlier historical data for the new 2012 inflation base) but is lower than the 4.9 percent that market watchers were expecting.

“There are also signs that inflation is slowing and may be close to peak,” Espenilla said. “Inflation slowed down in the National Capital Region. Month-on-month seasonally adjusted inflation has also continued to decelerate. It helps that oil prices seem to have peaked and food price inflation is also slowing down.”

The chief of the central bank — which is facing criticism from market watchers what is perceived to be its delayed monetary policy tightening to head off inflation — said the Monetary Board “will consider what further adjustments are necessary to firmly anchor inflationary expectations and ensure that the inflation target will be achieved in 2019.”

“The inflation outlook continues to be a concern and requires close attention,” he said. “The actual May inflation of 4.6 percent is at the low end of our forecast range for the month. That’s positive although headline inflation remains generally elevated.”

Espenilla noted that, despite inflation having tapered off in Metro Manila, price increases in provincial areas have accelerated in the past month, and the so-called “core inflation” (which excludes volatile fuel and rice prices) remain elevated at 3.6 percent.

The BSP’s economists had earlier predicted that the May inflation rate would settle anywhere between 4.9-5.4 percent chief stressed that due to rising petroleum and rice prices, but Espenilla pointed out that the central bank does not keep a month-to-month target. Instead, he said it keeps track of the annual average — which now stands at a 5-month mean of 4.1 percent — and should be viewed over a medium-term horizon to even out unexpected big shocks like oil prices.

“The January to May 2018 average is still above target, but maybe not going to be as bad as some might think,” Espenilla said. /je