Angelo Taningco
Economist, Treasury Group

Inflationary pressures have weakened in May with the headline Consumer Price Index (CPI) inflation down to 3.1% year-on-year (yoy) for the month from 3.4% yoy in April, according to the latest inflation report of the Philippine Statistics Authority (PSA) released on 6 June. The May’s reading is 0.2 percentage point below the market’s median forecast including ours. Similarly, core CPI inflation edged down to 2.9% yoy in May from 3.0% yoy in April. On a month-on-month (mom) basis, headline CPI inflation slipped to 0.1% in May from 0.2% in April.

The decline in the yoy headline CPI inflation rate for the month of May compared to April stems from slower price hikes in eight out of eleven commodity groups in the CPI, and these include food and non-alcoholic beverages and transport. Food and non-alcoholic beverages, which has the biggest weight among commodity groups in the CPI at 39.0%, recorded a 3.8% yoy price increase in May, slower than its April print of 4.2% yoy. Transport, which has a 7.8% CPI weight recorded a 2.7% yoy price rise in May following its 3.2% yoy increase in April.

Inflationary pressures are weaker in both the National Capital Region (NCR) and Areas Outside NCR (AONCR) as inflation rates in May were at 3.7% yoy for the former (versus 3.9% yoy in April) and 3.0% yoy for the latter (compared with 3.3% yoy in April).

In summary, the current inflation environment remains manageable and the inflation outlook also appears to be the same, especially since the latest headline and core inflation rates are within the Bangko Sentral ng Pilipinas (BSP) inflation target range of 2.0%−4.0% with both hovering close to the midpoint of the range. Against this backdrop, we maintain our view that the BSP Monetary Board will likely decide not to alter its key interest rates and reserve requirement ratios in their upcoming meeting on 22 June, and thereby maintaining its current monetary policy stance in order to ensure price stability and remain supportive of economic growth.

Figure: Headline and Core Inflation
Jan. 2015 – May 2017
(yoy %)

 
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