May inflation climbs to 4.5% as pressure seen to mount

MANILA, Philippines—(UPDATE) Headline inflation rose to 4.5 percent in May, from 4.3 percent in the same month last year, fueling speculations that the rate of rise in consumer prices could even be faster in the months ahead.

According to the National Statistics Office’s latest inflation and consumer price index report, faster rates of rise were recorded in the clothing, fuel, light and water indexes, as well as miscellaneous items.

The 4.5-percent figure in May was the highest reported in 13 months.

With the latest figure, inflation in the five months to May averaged at 4.2 percent—well within the Bangko Sentral ng Pilipinas’ target range of between 3 and 5 percent.

In January, inflation came in at 3.6 percent from that of last year. In February, March and April, the rate went steady at 4.3 percent.

Core inflation in May, which excluded volatile food and energy items, rose 3.7 percent compared with 3.3 percent in April.

Monetary authorities are now closely watching factors that may exert upward pressure on consumer prices.

BSP Governor Amando M. Tetangco Jr. on Tuesday said that the inflation figure in May was “higher than the revised April number … [suggesting] upward price pressures.”

This development “calls for continued close monitoring of possible sources of inflationary impulses and their likely impact on future inflation and inflation expectations to ensure that the monetary policy stance is consistent with the price objective,” Tetangco added.

Market watchers expect the BSP to raise its policy rates by 25 basis points soon.

At present, the country’s overnight borrowing rate stands at 4.5 percent, while the overnight lending rate is at 6.5 percent.

A 25-basis-point hike will bring the overnight borrowing rate to 4.75 percent and the overnight lending rate to 6.75 percent.

The central bank’s policy-making Monetary Board is scheduled to meet next week to decide on its next key rate policy.

In May, price hikes for FLW (fuel, light and water) rose to 8.7 percent from 6 percent in April.

The same was observed in clothing (2.1 percent from 2 percent) and miscellaneous items (1.3 percent from 1.2 percent).

Price increments for the heavily weighted food, beverages and tobacco remained at the previous month’s level of 4.2 percent, as did those for services, which stayed at 6.5 percent.

On the other hand, the uptick in the prices of housing and repairs slowed to 2.1 percent from the April level of 2.3 percent.

According to NSO administrator Carmelita N. Ericta, annual inflation for food alone eased to 4.2 percent from the previous month’s 4.3 percent.

Ericta said a slowdown was also observed in fruits and vegetables, meat, and miscellaneous food items. However, faster price hikes were seen in rice, corn, cereal preparations, and dairy products.

Analysts said the inflation figure could steadily increase in the coming months, but they did not predict any dramatic surge in prices.

Cid Terosa, an economist with the University of Asia and the Pacific, said the fact that inflation did not ease to below 4.3 percent in the first three months indicated a “persistent upward pressure” on prices.—em>With a report from AFP

Originally posted at 2:22 pm | Tuesday, June 7th, 2011