BSP sees May inflation possibly settling below 1%
There is a possibility that inflation eased to below 1 percent in May, thanks to more affordable food items and lower energy prices, the Bangko Sentral ng Pilipinas (BSP) said.
In a statement on Friday, the BSP said inflation, as measured by the consumer price index (CPI), might have settled within the range of 0.9 to 1.7 percent this month.
If realized, the figure that will be reported by the Philippine Statistics Authority on June 5 would mark a deceleration from the 1.4 percent CPI print in April.
Overall, the BSP’s projection suggested that price growth this month might have settled below the lower-end of the official target range of 2 to 4 percent.
“Easing prices of rice and fish due to favorable domestic supply conditions in conjunction with lower oil prices, electricity rates, and the peso appreciation contributed to the downward price pressures for the month. These could be offset in part by higher prices of vegetables and meat items,” the central bank said.
“Going forward, the Monetary Board will continue to take a measured approach in adjusting the monetary policy stance in line with its price stability objectives conducive to balanced and sustainable growth of the economy and employment,” it added.
Easing cycle
As it is, another month of benign inflation would support the ongoing easing cycle of the BSP, which has so far trimmed the benchmark rate that banks typically use when pricing loans to 5.5 percent.
BSP Governor Eli Remolona Jr. said there was “plenty of room” to reduce borrowing costs, adding that at least two more rate cuts are likely on the table this year.
The powerful Monetary Board will meet again on June 19 to decide on policy settings, which had become more complicated than ever amid heightened global trade uncertainties emanating from the ongoing US trade war.
Consumer spending
In a commentary, Bank of America (BofA) said tame inflation should help boost consumer spending, a major driver of economic growth in the country.
And such a strength, BofA explained, could be seen in the higher revenue growth of seven Philippine-listed consumer stocks over the last three quarters, as well as in the brisk consumer credit growth that’s outpacing bank lending to businesses.
“Consumer confidence inversely tracks inflation and this decline in inflation in 2025 should see consumer confidence finally return to prepandemic levels,” BofA said.
