Inflation picks up in May

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Metro Manila (CNN Philippines, June 5) — Inflation rose to a two-month high in May, breaking a sustained downtrend since the year opened as food and utility costs picked up.

The Philippine Statistics Authority (PSA) said inflation settled at 3.2 percent for the month, climbing from three percent in April although still lower than the 4.6 percent logged in May 2018.

The PSA said prices of food and non-alcoholic drinks picked up faster last month, led by vegetables, fruits, and fish. Housing and utility expenses — such as water, electricity, and fuel — also inched up to 3.3 percent from 3.2 percent in April, data showed.

In contrast, transport costs slipped to 3.5 percent. The Bangko Sentral ng Pilipinas (BSP) had earlier warned that a jeepney fare hike in Central Visayas could push up inflation.

Other items such as health, communication, clothing, and recreation expenses saw prices steady from the previous month, the PSA said.

Still, the rate fell well within the 2-4 percent target range set by the BSP. This, however, settled higher than the 2.9 percent median forecast from a CNN Philippines poll among 13 economists last week.

Inflation measures how fast prices of basic goods like food and transport have risen compared to the previous year.

The central bank has observed a sustained slowdown in price spikes since the year opened. May's rate is the fastest since March's 3.3 percent reading, with the month-on-month rate slightly faster at 0.3 percent.

Inflation has averaged 3.6 percent in the past five months, with the BSP expecting the full year rate at 2.9 percent.

BSP Deputy Governor Diwa Guinigundo attributed the higher food prices to the dry spell, as the country reels from El Niño which could last for the rest of the year.

"Basically, the drivers of inflation remain on the supply side and are therefore generally temporary," Guinigundo told CNN Philippines in a text message.

He added that the central bank will continue monitoring price movements to guide their next steps. A policy meeting is scheduled on June 20.

Central bank officials saw the sustained inflation slowdown since November as a signal to start unwinding the series of interest rate hikes in 2018, which was then meant to rein in inflation expectations after price spikes that year. The BSP trimmed interest rates by 25 basis points and announced a series of cuts for bank reserve requirements until July.