ING Bank: Inflation could dip below 3% in May
MANILA, Philippines — Consumer price growth could soften below 3% in May on the back of stable food prices, a global bank said Tuesday.
In a note sent to reporters, ING bank said inflation this month likely cooled down below the government’s 2%-4% target amid falling rice prices.
“With food prices likely stable or decelerating, we can expect overall headline inflation to be tame for the rest of the year,” said Nicholas Mapa, senior economist at ING Bank in Manila.
“The May figure could fall below the BSP's inflation target of 3% as fuel prices saw only marginal gains year-on-year, although utility costs are projected to be slightly higher for the said month,” he added.
Rice is the basic staple in the Philippines and accounts for nearly 10% of the basket of goods used to compute inflation.
“With rice supply chains normalising even ahead of the implementation of the Republic Act 11203 which lifted import restrictions, rice prices have fallen for six straight weeks according to latest data from the Philippine Statistics Authority,” Mapa said.
“Meanwhile, the rest of the food basket, which corners 38% of the [consumer price index] basket, has seen disinflation for 7 straight months, helping headline inflation exhibit that humped-shape curve given the supply-side nature of the 2018 episode,” he added.
“With supply conditions stable for now, we expect the [Bangko Sentral ng Pilipinas’] forecast for 2.9% inflation in 2019 to hold with possible further easing given the BSP's dovish leaning,” he continued.
Inflation eased to 3% in April driven by moderate price increments recorded in food items. Year-to-date, inflation averaged 3.6%, well within the BSP’s 2%-4% annual target.
In a bid to power growth amid cooling inflation and tight liquidity conditions, the BSP this month cut its benchmark rate by 25 basis points to 4.5% from a decade-high of 4.75%, and announced a three-step reduction in bank reserves to 16% from 18%.
The government will release the official inflation data for May on June 5. — Ian Nicolas Cigaral
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