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Economist sees inflation still on plateau this May

THE growth of consumer prices in the country likely remained steady in May this year as underlying price pressures started to temper, a private economist said.

Security Bank Corp. Economist Robert Dan J. Roces forecasts inflation to have hit 4.5 percent in May this year similar to March’s and April’s rate for 2021.

Roces said the inflationary pressures that pushed the growth of prices early on this year likely dissipated in May. In particular, he noted substantial decline in the heavily-weighted food price basket.

“[This helps] curb overall price growth on the back of the preliminary effects of the temporary reduction of pork tariffs and the increase of the minimum access volume [MAV] for imported pork,” the economist said.

The lower food inflation is also expected to outweigh the higher electricity costs for the month.

The Bangko Sentral ng Pilipinas (BSP) forecasts inflation to average 3.9 percent for the year. This is within the 2 to 4 percent inflation target of the Central Bank for the year.

Just last week, BSP governor Benjamin E. Diokno said inflation will remain within target on average for this year despite the expected uptrend in the global oil prices.

Diokno said they have already factored the recent uptrend in global oil prices into its latest baseline inflation projections which showed a target-consistent inflation path over the policy horizon.

Roces, meanwhile, said threats from second-round effects may remain subdued for now, but the steady uptick in global oil prices as the rest of the world recovers from the pandemic provides significant upward risks to local inflation. This, according to hime, is something to watch out for.

“However, the amount of slack in the economy given that domestic demand remains down may help dampen some pressure from second-round effects, and we expect the BSP will keep the policy rate steady at 2 percent for the rest of the year to support recovery,” he added.

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