MANILA, Philippines – Inflation tamed further at 1.2% in June, as consumer prices moved at their slowest pace in two decades, thanks to sufficient supply of food and moderate price pressures in energy and oil rates, the Philippine Statistics Authority (PSA) reported Tuesday, July 7. (READ: May inflation drops to 1.6%, lowest in 20 years)
The June inflation of 1.2% defied analysts’ expectations that it would not go any lower than 1.6%, the record for May 2014, citing strong pressures from the probable impact of drought, poor agricultural harvest, and election-related spending in the coming months. (READ: Philippine inflation unlikely to go lower than 1.6%)
It’s the lowest rate covering the monthly inflation series from 1995 to 2015 using the current base year 2006, according to Emmanuel Esguerra, officer-in-charge and deputy director general of the National Economic and Development Authority (NEDA).
Latest data showed inflation plunged 2.8% from June 2014’s 4.4%, bringing year-to-date inflation to 2%. April’s inflation was 2.2%.
Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr said in a text message that May’s inflation was well within the central bank’s forecast of 1.2% to 2% while the year-to-date average of 2% was within the lower bound of the government target range of 2% to 4%.
BSP reported in April that the first quarter inflation for 2015 eased at 2.4%, remaining within the government target range.
The Monetary Board, the central bank’s policy-setting body, kept interest rates on hold on June 25 but authorities sounded off on risks stemming from El Niño, as well as events abroad that could destabilize prices in the country.
“While this outturn is at the low-end of the target range, there remain upside risks of financial market volatility in reaction to developments in Greece and possibility of El Niño later this year that necessitate care in next moves,” Tetangco said.
“We will continue to monitor developments to see if there is a need to make adjustments to our policy levers,” the BSP chief added.
Bucking the trend
Esguerra said that the Philippines managed to buck the trend, as other member countries of the Association of Southeast Asian Nations (ASEAN) booked higher inflation over the past two months.
“It is also worth noting that except for the Philippines, inflation in the ASEAN-5, which includes Indonesia, Malaysia, Singapore, and Thailand, generally posted upward adjustments in May and June 2015,” he said.
“The slackening of the core inflation provides less pressure for interest rates to increase, and this bodes well for household consumption and further supports economic expansion moving forward,” Esguerra said.
Esguerra also echoed the statement of the BSP governor on the need to remain cautious against any upside inflation risk, such as that arising from the occurrence of typhoons in the second half of the year, which could be intensified by the prolonged El Niño.
He added that inflation in 2016 and 2017 is expected to remain within the target range of 2% to 4%. – Rappler.com