File photo shows a man passes by an advertisement for common holiday commodities at a mall in Pasig City, Oct. 9 2018.
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BSP expects June inflation to settle at 2.2%-3%
( - June 28, 2019 - 4:07pm

MANILA, Philippines — Inflation likely softened to as low as 2.2% in June on the back of lower pump prices and a stronger peso, the Bangko Sentral ng Pilipinas said Friday.

In a statement, the BSP’s Department of Economic Research pegged June inflation at 2.2% to 3%.

“Lower rice and domestic oil prices along with downward adjustment in electricity rates and recent peso appreciation are seen to temper inflation pressure during the month,” the central bank unit said.

“Going forward, the BSP will remain watchful of the evolving inflation environment to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” it added.

The BSP held off further policy easing this month and kept its key rate unchanged after inflation accelerated to 3.2% in May. In the policy statement, monetary authorities described their decision as a “prudent pause for the time being.”

Year-to-date, inflation averaged 3.6%, still within the BSP’s 2%-4% annual target.

In a commentary sent to reporters Friday, Japan-based Nomura said the combined fiscal outturn in April and May — both of which saw the state’s budget balance swung to a surplus — “likely disappointed BSP.”

“Fiscal spending, in our view, has been relatively slow to recover after the budget was delayed and approved only by mid-April. This will likely prompt the authorities to intensify implementation of “catch-up” spending plans, although these will only likely be more successful well into H2,” Nomura said.

“The initially slow rebound in fiscal disbursements should also provide a justification for BSP to resume policy rate cuts shortly, focusing on supporting growth further while the inflation outlook remains benign, as we expect headline CPI inflation to fall well below the mid-point of the 2-4% target in coming months,” it added. — Ian Nicolas Cigaral

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