INFLATION likely slowed further in April, with the continued decline in oil prices amid the pandemic seen offsetting the slight uptick in food costs due to the extended lockdown of Luzon island.

A BusinessWorld poll of 13 economists held last week yielded a median inflation estimate of 2.1% for April, closer to the lower end of the 1.9% to 2.7% estimate of the Bangko Sentral ng Pilipinas (BSP).

If realized, April will be the third straight month of a slower rise in prices of widely used goods after the 2.5% print in March, and is also below the 3.1% seen in the same month in 2019.

BSP Governor Benjamin E. Diokno has said headline inflation may average at two percent this year, down from the 2.2% forecast given in March. The central bank targets a 2-4% inflation this year and next.

The Philippine Statistics Authority (PSA) will report official April inflation data on May 5.

Analysts said the decline in global oil prices likely continued to pull down inflation last month.

“The world price of crude oil continues to decline due to lower demand on the back of disruptions in the global supply chain production as well as in transportation and wholesale and retail trade,” De La Salle University economist Mitzie Irene P. Conchada said in an e-mail.

Global oil prices have been on a downtrend since March due to falling demand caused by the coronavirus disease 2019 (COVID-19) pandemic, with US oil prices even sinking into negative territory in mid-April.

Prices since rebounded but have yet to go back to pre-pandemic levels after a commitment from members of the Organization of the Petroleum Exporting Countries to cut production by 10 million barrels per day starting this month.

On the other hand, an uptick in food prices due to panic buying amid the lockdown likely pushed up inflation, offsetting the lower oil prices.

“Despite the relative slowdown in business activity and the sluggishness in consumer demand, we can see traces of consumer activity brought about by panicky actions of buyers as they cope with the onslaught of the pandemic,” Colegio de San Juan de Letran Graduate School Dean Emmanuel J. Lopez said in an e-mail.

“[F]ood prices may have gone higher due to supply bottlenecks as a result of [the] ECQ (enhanced community quarantine),” said Alvin P. Ang, an economics professor at Ateneo de Manila University.

Among the food groups that saw upticks in prices include rice and vegetables, according to UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion.

The PSA reported that the average wholesale price of well-milled rice rose 2.96% week on week to P38.59 per kilogram in early April, while the retail price went up 2.19% to P42.40.

Meanwhile, the average wholesale price of regular-milled rice jumped 2.39% to P34.14 per kilogram, while the average retail price increased by 1.35% to P36.86.

Analysts said more rate cuts from the central bank are in the cards as headline inflation is seen slowing further amid the pandemic.

Alex Holmes, economist at Capital Economics, said supporting the economy is a bigger concern for the BSP right now.

“As such, we think monetary policy will be loosened further in the coming months as the scale of the economic hit from COVID-19 becomes more apparent,” Mr. Holmes said.

Even with the overnight reverse repurchase rate or key rate at a record low of 2.75% following last month’s aggressive 50-basis-point (bp) cut, inflation is seen settling lower than this, which means there is space for further easing, said Thatchinamoorthy Krshnan, economist at Oxford Economics.

“With the risk that inflation will fall below 2% this year increasing, further loosening of monetary policy in the form of policy rate and RRR (reserve requirement ratio) cuts are still on the table,” Mr. Krshnan said.

The BSP cut rates to record lows in an off-cycle meeting on April 16 in a bid to cushion the blow of the COVID-19 crisis on the economy. Following this, the Monetary Board (MB) canceled its scheduled policy meeting on May 21.

Its next rate-setting meeting is on June 25.

Mr. Diokno last week said the BSP is not ruling out further easing even as it has already slashed benchmark rates by 125 bps this year. He said rate cuts and RRR reductions are still on the agenda, but its decision will depend on its assessment of how banks are reacting to recent stimulus measures.

The BSP also cut rates by a total of 75 bps last year, which means it has completely unwound the 175 bps in hikes done in 2018.

Meanwhile, the RRR of universal and commercial lenders was reduced by 200 bps to 12% early last month to help boost liquidity in the financial system during the Luzon lockdown. The MB has authorized Mr. Diokno to cut RRR by a total of 400 bps for the whole year.

On the other hand, the reserve requirement of thrift and rural banks stand at four percent and three percent, respectively. A liquidity boost for smaller lenders came in the form of a 400-bp reduction in the minimum liquidity ratio for standalone thrift and rural banks to 16% until the end of the year. — Luz Wendy T. Noble