Surprise! PH inflation slowed to 6.8% in May

MANILA, Philippines – Philippine inflation surprised on the downside in May as transport and food costs finally began to ease three months into the energy crisis triggered by the Middle East war.

Consumer prices slowed to 6.8 percent from 7.2 percent in April, the Philippine Statistics Authority reported on Friday. This marks the first time inflation has gone down since the start of the year.

The latest reading fell below the central bank’s 7.1- to 7.9-percent forecast for the month and was also lower than the 7.7-percent median estimate of 12 economists polled by the Inquirer.

READ: BSP sees May inflation at 7.1%-7.9% on food, peso pressures

However, inflation remained above the government’s 2- to 4-percent target range for the third straight month and stayed near its highest level in more than three years.

From January to May, average inflation stood at 4.5 percent.

State statisticians attributed the softer-than-expected print to slower increases in transport, food and housing and utility costs, although inflation across these categories remained elevated and is still volatile.

Transport inflation eased to 16.2 percent from 21.4 percent in April after diesel prices dropped to 58.5 percent from 122.7 percent, while gasoline inflation slowed to 51.6 percent from 59.6 percent.

This came after domestic pump prices began posting rollbacks in mid-April. Fuel prices in Metro Manila had climbed to as much as P170 per liter at the height of the Middle East war, but have since fallen by at least half as of early June.

Food costs likewise eased to 5.7 percent from 6 percent, helped by slower price increases for vegetables, which dipped to 6.2 percent from 10.4 percent.

Rice inflation, however, accelerated to 15.6 percent from 13.7 percent, marking its highest level since July 2024, when it reached 20.9 percent.

Inflation for housing and utilities also slowed to 7.8 percent from 8.2 percent. Liquefied petroleum gas costs decreased to 41 percent from 45.8 percent following the suspension of its excise taxes that took effect in mid-April.

Electricity inflation, however, quickened to 8.8 percent from 8.3 percent. Meralco rates are seen to increase in June following red and yellow alerts in the Luzon grid last month, leading to tighter power supply conditions.

The latest inflation data may ease pressure on the Bangko Sentral ng Pilipinas (BSP) to respond aggressively to price shocks. Still, economists said the central bank is likely to keep a tightening bias as inflation remains significantly above target.

READ: BSP seen set for jumbo 50-bp rate hike to 5%

“While today’s softer print may offer some near-term relief to BSP, risks to the inflation outlook remain firmly skewed to the upside,” said Deepali Bhargava, economist at ING Bank.

“We view a 25-basis point (bp) rate hike in June as highly likely, with rising odds of a larger 50-bp move should there be no clear progress toward de-escalation ahead of the BSP’s June 18 meeting,” she added.

The shifting global financial landscape is complicating the task of monetary policy in the Philippines, with the country facing greater exposure to external shocks and market volatility, according to a paper by the Bank for International Settlements (BIS).

The May 2026 paper, contributed by researchers from the BSP, said financing has increasingly migrated from banks to capital markets since the Great Financial Crisis, alongside the rapid expansion of nonbank financial institutions and a growing share of government debt in global bond markets.

Those structural shifts have been amplified by a series of disruptions such as the pandemic, geopolitical tensions and abrupt changes in US monetary policy. These shocks, the paper noted, have underscored the enduring dominance of the greenback in global funding and asset allocation.

For emerging-market economies such as the Philippines, the evolving financial system has increased the country’s vulnerability to cross-border spillovers, the paper noted, exposing domestic markets to sharper swings in capital flows, foreign-exchange pressures and volatility in local bond markets.

“The rise in foreign participation in local debt markets has supported market development,” the researchers said. “However, it has also partly amplified the pass-through of global interest rate cycles to domestic financing conditions.” INQ