Higher transport, food costs drive May inflation – BSP

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Metro Manila (CNN Philippines, May 31) — Inflation could have slightly picked up in May as the cost of some food items and jeepney fares went up, the Bangko Sentral ng Pilipinas (BSP) said.

The BSP's Department of Economic Research said the prices of basic goods may have risen by between 2.8-3.6 percent for the month. This follows a three percent reading in April, a 16-month low that came from a 2.7-3.5 percent forecast.

The Philippine Statistics Authority will report official inflation data on June 5. Inflation settled at 4.6 percent in May 2018, marking a steady climb that led the central bank to kick off a series of interest rate hikes to temper price spikes that year.

The central bank wants inflation to settle between 2-4 percent, with the four-month average now at 3.6 percent. Last year, inflation averaged 5.2 percent.

"Upside price pressures could emanate from the jeepney fare adjustment in Central Visayas and higher prices of selected food items. At the same time, positive base effects could account for temporary price pressures in May," the BSP unit said Friday.

The Land Transportation Franchising and Regulatory Board approved the hike in minimum jeepney fares in Central Visayas to ₱8 from ₱6.50 effective this month.

These increases could have been offset by lower rice prices, fuel price rollbacks, and lower electricity rates for the month, the central bank said.

Meanwhile, a CNN Philippines poll among 13 economists pointed to a further slowdown for price movements, fetching a 2.9 percent median.

Seven analysts projected an even slower inflation rate for May, three said prices may have picked by another three percent, while three others pegged a 3.1 percent pickup.

"My forecast is 3.1 percent since crude oil prices were still high up to mid-month," said Victor Abola, economics professor at the University of Asia & the Pacific.

Bank of the Philippine Islands lead economist Emilio Neri, Jr. added that higher prices of fish and other food items may have reversed previous declines.

Philstocks Research head Jun Calaycay gave a three percent estimate, saying that subdued oil price movements may have been offset by a "slight uptick in spending" running up to the May 13 elections.

On the opposite end are those who expect a fresh slowdown in price adjustments.

"Rice prices have consistently been lower for the last 6 weeks while the government has been proactive in importing foodstuffs given the onset of the El Niño dry spell. And although local pump prices have risen year-to-date, recent rollbacks have both diesel and gasoline prices roughly flat from the same period in 2018," said Nicholas Antonio Mapa, senior economist at ING Bank N.V. Manila.

For Security Bank chief economist Robert Dan Roces, prices may have picked up at a more modest pace as food costs remain low. He added that the El Niño phenomenon has not affected rice prices just yet.

Inflation has declined for six straight months from the nine-year peak of 6.7 percent in September and October last year. This trend also allowed the BSP to start unwinding the 175 basis points (bp) worth of rate hikes in 2018, starting with a 25bp cut last May 9.