Inflation seen picking up in June

MANILA, Philippines – The Bangko Sentral ng Pilipinas expects a faster uptick in June inflation, citing higher food prices and tuition.

BSP Governor Amando Tetangco said the June inflation could settle between 1.5 and 2.4 percent from 1.6 percent in May.

“Upside inflation pressures could come from the increase in tuition fees as well as in rice and vegetable prices...,” Tetangco Jr. told reporters in a text message.

Finance Undersecretary and chief economist Gil Beltran, meanwhile, had a more specific outlook of 1.8 percent due to “higher food price increase and possibly higher price increase in the education sub-group.”

Inflation, as measured by the consumer price index, accelerated to a one-year high of 1.6 percent in May. Official data for this month will be released July 5.

For the first five months, inflation stood at 1.3 percent, below the BSP’s two- to four-percent target for the year. Consumer prices rose an average of 1.4 percent in 2015.

While food and school fees could trend higher, Beltran and Tetangco separately said they could be offset by lower fuel and electricity prices.

In particular, Beltran said fuel prices remain down by an average of 0.8 percent compared to last year despite recent recovery seen in the world market.

However, the contraction is much slower from May’s 1.2 percent, suggesting “the benefit of base effects in the energy sub-group is already being eroded.”

In fact, net adjustments in diesel and gasoline prices as of June 21 showed a rise of P2.32 and P0.45 per liter, respectively, data from the Department of Energy showed.

On utility prices, Beltran said rates by energy distributor Manila Electric Co. (Meralco) plunged to their seven-year low this month after a P0.13 per kilowatt hour cut.

“The BSP will continue to monitor evolving price trends to ensure price stability conducive to a balanced and sustainable economic growth,” he said.

For Beltran, “benign” inflation gives the economy additional buffer against the impact of the UK’s exit from the European Union that has rattled world markets.