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Consumer
prices, while benign in outlook and actuality, rose 2.4
percent in May and confirmed the authorities’ projection
that inflation will push higher in the second half of
the year.
Inflation hit a low of 2.2 percent months earlier as
food supply proved ample.
This
brought the year-to-date average rate to 2.7 percent or
well within the anticipated 4 percent to 5 percent
target for the year.
“The
rate is within our forecast range. It confirms the
Bangko Sentral ng Pilipinas’s assessment of some
short-lived pressure from El Niño and the creeping oil
prices,” BSP Governor Amando M. Tetangco said in a
mobile phone message on Tuesday.
Tetangco
said earlier the BSP inflation model for May showed
inflation ranging from 2.1 percent up to only 2.8
percent.
The
median estimate of nine economists in a Bloomberg survey
was 2.5 percent.
Core
inflation, which takes away the influence of the
volatile food and oil components of the consumer price
index, was seen stable going forward as the rate
remained unchanged at 2.6 percent, the National
Statistical Office said Monday.
The
stabilizing inflation outlook strengthens the likelihood
of the BSP keeping the current monetary settings where
they are. That is, the rates at which the BSP borrows
from or lends to banks on short-term basis will likely
be kept at 7.5 percent and 9.75 percent, respectively.
For
short-term borrowers, this means the cost of money going
forward would remain as affordable as they were when
they were in October 2005.
“The
general trend points to a still stable inflationary
environment,” said Christy Tan, a currency strategist at
Bank of America in Singapore. “The central bank does not
need to tweak its current monetary policy stance at
present.”
Socioeconomic Planning Secretary Romulo L. Neri said the
inflation rate uptick in May, after months of continued
decline, was expected mainly with the increase in oil
prices.
But Neri
noted future price movements would remain moderate and
below the Development Budget Coordination Committee
projections of 4 percent to 5 percent this year.
“The
average Dubai crude oil price increased to $63.97 per
barrel from $58.8 per barrel but was slightly tempered
domestically by the appreciation of the peso against the
dollar from P47.82 to the dollar in the previous month
to P46.81 to the dollar in May,” Neri said in a
statement issued by the National Economic and
Development Authority, which he also heads.
Fuel,
light and water costs rose 4 percent, accelerating from
2.2 percent in April, the NSO report showed. Price
increases for food, beverage and tobacco and five other
categories slowed or remained steady.
Unleaded
gasoline rose 4 percent in May, according to the
Department of Energy web site. The price of crude oil
climbed to $66.27 a barrel on May 21, close to April’s
six-month high. The Philippines imports more than 90
percent of its crude oil, making it sensitive to price
fluctuations.
The
pick-up in inflation “was a result of near-term price
pressures, particularly oil prices,” Tan said. “We have
some balancing effect because of the peso.
The peso
has gained 7.2 percent this year to its strongest level
against the US dollar since September 2000 on rising
remittances from overseas Filipino workers. That’s held
down the cost of imports, including crude, when
converted to the local currency.
Remittances, which make up about a tenth of the economy,
climbed 26 percent in March. That’s fueled an
acceleration in money supply growth, which expanded 26.3
percent in April, exceeding the central bank’s target of
a 20-percent cap for a fifth month. That may stoke
inflation, said Frederic Neumann, an economist at HSBC
Holdings Plc in
Hong Kong.
“High
money supply growth and strong domestic demand growth
are all ingredients for a pick-up in inflation,” Neumann
said. “The only factor against that is the peso’s rise,
which is keeping a lid on prices.”
The
benchmark five-year Treasury yield rose 21 basis points
to 6.3635 percent, according to the Philippine Dealing &
Exchange Corp. The peso fell 0.5 percent to 45.845 to
the dollar.
The BSP
has kept its key interest rate at 7.5 percent since
October 2005. In November, it introduced lower payments
for overnight deposits exceeding P5 billion to encourage
lending. The central bank’s next rate-setting meeting is
scheduled for July 12.
--Jun Vallecera, Rommer
Balaba, Bloomberg |
