BSP Governor Benjamin E. Diokno

THE CENTRAL BANK expects May inflation to have continued beyond its target range in May, though moderated by lower food prices and a stronger peso.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the bank expects headline inflation in May to likely come in at between 4% and 4.8%. 

Mr. Diokno said the midpoint of the range, 4.4%, would mark the fifth straight month of inflation breaching the 2-4% target and will be double the 2.2% posted in May 2020. It would however be lower than the 4.5% reported in April as well as the 4.5% median estimate in a BusinessWorld poll of 17 analysts last week.

“Higher prices of meat and domestic petroleum products along with the upward adjustment in Meralco electricity rates are the main sources of upward price pressures for May,” Mr. Diokno said in a Viber message.

The Department of Energy reported that gasoline, diesel, and kerosene prices increased by P8.50, P7.20, and P5.85 per liter respectively in the year to date as of May 25.

The Manila Electric Co. has said that its overall power rate for May will rise to P8.5920 per kilowatt-hour (kWh) from the P8.4067 per kWh rate the month prior.

Pork prices are helping drive inflation to beyond-target levels, due to shortages caused by the African Swine Fever outbreak.

Executive Order 134 signed earlier this month temporarily reduced the tariffs for pork imports to 10% for the first three months under the current minimum access volume and 20% for the first three months for imports outside the quota. Meanwhile, tariff rates of 15% and 25% for in-quota and out-of-quota pork products will be applied between the fourth and 12th month.

Downside pressures on inflation during the month include lower prices of staples such as rice, vegetables, and fish due to improved supply, Mr. Diokno said. The stronger peso will also moderate the upside risk to inflation, he added.

The peso closed at P47.80 to the dollar on Friday. It has appreciated by 22.3 centavos or by 0.46% since Dec. 29, the last trading day of 2020.

“Moving forward, the BSP will remain watchful of economic and financial developments to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” Mr. Diokno said.

The central bank on May 12 retained its key policy rate at 2%, noting it will continue to support the recovering economy. It has lowered its inflation forecast for the year to 3.9% from the 4.2% it gave in the February policy review.

The Philippine Statistics Authority will report May inflation data on Friday, June 4. — Luz Wendy T. Noble