By Bianca Cuaresma, June 6 2019; Business Mirror
Image Credit to Business Mirror
THE Bangko Sentral ng Pilipinas (BSP) showed no worry on Wednesday, after the Philippine Statistics Authority (PSA) reported an uptick in inflation for the first time in six months.
Inflation took a 3.2-percent print in May—an uptick from the 3 percent in the previous month but lower than the 4.6 percent in the previous year. The data showed that inflation snapped its six-month declining trend in May.
The country’s inflation started to decline in November 2018 after hitting its peak of 6.7 percent in September and October last year. The decline was a result of concerted efforts from economic managers to put in place monetary and nonmonetary policy levers to bring down the growth of prices.
The BSP, for its part, made rate hikes to the tune of 175 basis points in 2018—one of its most aggressive cycles to date—to curb inflationary pressures.
Now that inflation has risen for the first time in half a year, the BSP remained confident that a month’s inflation rise is not a cause for alarm for the country’s inflation targeters.
“The inflation outturn for May 2019 continues to be in line with the BSP’s current assessment that inflation will settle within the target range of 2 to 4 percentage points for 2019 and 2020,” BSP Governor Benjamin Diokno said in a statement.
“Looking ahead, the BSP will continue to monitor evolving price trends to ensure that the monetary- policy stance remains consistent with its price stability objective,” he added.
Economists and analysts are also not worried with the uptick.
Rizal Commercial Banking Corp. (RCBC) economist Michael Ricafort said inflation is expected to continue declining on average for the rest of the year.
“Inflation rate in the coming months of 2019 may likely resume its easing/declining trend largely due to the bigger inflation denominator/base effects,” Ricafort said. “Thus, year-on-year inflation is expected to decelerate/slow down at a much faster rate to below 3 percent starting June 2019, deeper into 2 percent levels in most of third quarter 2019 and fourth quarter 2019.”
“There is even a chance for inflation to go down further to 1 percent levels in late third quarter 2019 to early fourth quarter 2019 due to the very high inflation denominator/base a year ago (when inflation reached a near decade-high of 6.7 percent in September 2018 and October 2019),” he added.
Meanwhile, ING Bank Manila economist Nicholas Mapa said that while the uptick in inflation was a surprise, it still does not derail the within-target inflation path for the year.
“The May reading caught the market offguard but falls within the BSP’s inflation forecast band. Year-to-date inflation remains within target and BSP’s forecasts still point to inflation settling well within target. The BSP remains committed to monitoring data and the inflation path and will act accordingly,” he said.