THE Bangko Sentral ng Pilipinas (BSP) believes that inflation may have slightly decelerated in May this year as upward pressures were offset by the decline in food prices during the month.
BSP Governor Benjamin Diokno told reporters that inflation may have hit 4.4 percent in May, with a range of 4 to 4.8 percent for the month. Their forecast is slightly lower than the 4.5-percent inflation print in April. It is still, however, beyond the ceiling of the 2- to 4-percent average annual target range for the year.
“Higher prices of meat and domestic petroleum products, along with the upward adjustment in Meralco electricity rates, are the main sources of upside pressures for May,” Diokno said.
“These could be offset by the decline in prices of key food items, such as rice, vegetables and fish, due to improved supply conditions, along with the appreciation of the peso,” he added.
In a recent press briefing, Diokno reiterated that despite the elevated inflation in the early months of 2021, inflation will still fall within range on average by the end of the year. This is amid the rising prices of global crude oil.
Diokno said they have already factored in the recent global oil price uptrend into the latest baseline inflation projections which showed a target-consistent inflation path over the policy horizon.
In their latest monetary policy meeting in May, the BSP revised their forecast for the year to 3.9 percent, down from the 4.2-percent forecast in their February meeting.
For next year, however, the BSP revised their target higher from 2.8 percent to 3 percent, due to the expected increase in global crude oil prices and faster economic prospects.
Diokno, however, earlier said they will still monitor inflation closely, and watch for potential signs of second-round effects.
“The BSP remains on the lookout for possible second-round effects that may require a monetary response, even as underlying inflation and the overall inflation outlook remains manageable in the Philippines due to the amount of prevailing slack in the domestic economy,” Diokno earlier said.
Economists have also echoed Diokno’s inflationary view, saying while pressures have dissipated, signs that point to second-round effects should be monitored.
In his statement on Monday,
Diokno said they will “remain watchful” of economic and financial developments to ensure that their monetary policy stance remains consistent with their price stability mandate.