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Central bank expects inflation to have resumed slowdown this month

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HEADLINE INFLATION this month — to be reported on July 5 — likely slowed from a year ago and from May amid lower rice prices, an electricity rate reduction and a stronger peso that made imports cheaper, the Bangko Sentral ng Pilipinas (BSP) Department of Economic Research said in an e-mail on Friday.

“The BSP Department of Economic Research projects June 2019 inflation to settle within the range of 2.2-3.0%,” according to the e-mail, explaining that “[l]ower rice and domestic oil prices, along with downward adjustment in electricity rates and recent peso appreciation, are seen to temper inflation pressure during the month.”

The lower end of BSP’s estimate would be the slowest in more than two-and-a-half years or since November 2016’s 2.1%, while the ceiling would match April’s pace and would be the slowest since December 2017’s 2.9%.

The ceiling of BSP’s June estimate compares to May’s 3.2%, which had interrupted six straight months of slowdown from a nine-year-high 6.7% in September and October 2018, and the 5.2% clocked in June last year.

BSP’s June estimate would take first-half inflation to a 3.32%-3.45% range against the central bank’s downward-adjusted 2.7% forecast average and 2-4% target band for 2019. Actual headline inflation averaged 3.6% in the five months to May.

Philippine Statistics Authority (PSA) data show average retail price of well-milled rice fell by 2.3%, 2.7% and 2.7% year-on-year in the first to third weeks of June, respectively, to P43.02 per kilogram (/kg) as of the third week, while average retail price of regular milled rice dropped by 4.1%, 4.4% and 4.7% annually in the first to third weeks, respectively, to P38.68/kg as of the third week.




The Energy department, however, reported that year-to-date adjustments of fuel pump prices amounted to a net increase of P3.70 per liter for gasoline, P2.75/liter for diesel and P1.10/liter for kerosene as of June 26.

Meanwhile, the overall rate of Manila Electric Co. — the country’s biggest electricity distributor — dropped for the second straight month by P0.1948 per kilowatt hour (/kWh) to P10.0918/kWh in June from P10.2866/kWh in May.

Rice accounts for 9.59% of the theoretical basket of goods used by a typical household that is the basis for computing year-on-year overall price changes, while liquid fuel, solid fuel, gasoline and electricity contribute 0.13%, 1.22%, 1.28% and 4.8%, respectively.

Supporting importers, the peso finished P51.24 against the dollar on Friday, appreciating by 3.9% from June 2018’s P53.34 close, while the local currency’s weighted average amounted to P51.233 to the greenback, 4.1% stronger than the year-ago P53.404, according to data from the Bankers Association of the Philippines. — with inputs from Mark T. Amoguis

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