Inflation hits fresh 5-year high in May

MANILA, Philippines — The overall jump in prices of key consumer items further accelerated in May to hit a fresh five-year high, although the latest figure was below expectations, the government’s statistics agency reported Tuesday.

Inflation spiked 4.6 percent last month, outpacing the 4.5 percent increase in April but lower than market estimates of 4.9 percent.

The May inflation rate was the highest since November 2011 and was above the Bangko Sentral ng Pilipinas’ 2-4 percent target range. Year-to-date, inflation averaged 4.1 percent.

“Inflation is mainly driven by fish and seafood, fuel and lubricants, and bread and cereals,” Socioeconomic Planner Rosemarie Edillon told a press conference,

“Seasonally adjusted inflation indicate temporary price pressures may be easing,” Edillon added.

Inflation in the National Capital Region cooled down to 4.9 percent in May from 5.2 percent in April.

However, inflation outside the capital showed no signs of slowing down after moving at a faster pace of 4.6 percent in May from 4.3 percent in the previous month.

For the first time in nearly four years, the BSP in May lifted key rates by 25 basis points to rein in inflation, with monetary authorities saying they are ready to undertake further policy action to maintain price stability.

The central bank now expects inflation to remain elevated in the coming months and peak “towards the end of 2018,” citing a possible jump in world crude prices and second-round effects of the tax reform law.

"The inflation outlook continues to be a concern and requires close attention," BSP Governor Nestor Espenilla said.

In a market commentary, analysts at Nomura said the BSP would likely follow up with 25 basis points policy rate hikes at each of its next two meetings in June and August, with inflation seen soaring above official targets this year.

"Feed-through" of the Duterte adminstration's tax reform law, impending increases in power rates and higher core inflation are expected to push up consumer prices, analysts said.

"We believe inflation expectations are likely to rise further given still-accelerating headline inflation, as evident in rising demand for wage increases," they added. — with a report from BusinessWorld