MANILA, Philippines — Inflation will likely “remain benign” in June even as the economy slowly restarts after nearly three months of shutdown, economists at the Bangko Sentral ng Pilipinas (BSP) said Tuesday.
In a statement, the BSP's Department of Economic Research said consumer price growth this month would likely settle within the 1.9-2.7% band, falling comfortably within the low-end of the central bank’s 2-4% target for the year.
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Inflation slowed for the fifth consecutive month in May to 2.1% year-on-year, averaging 2.5% for the first five months. The official June data will be released on July 7.
“Higher gasoline, diesel, and kerosene prices as well as the uptick in the price of rice due to supply bottlenecks contributed to positive price pressures during the month,” the central bank said.
“These could be partly offset by slightly lower LPG (liquefied petroleum gas) price and electricity rate in Meralco-serviced areas during the month,” BSP added.
Energy department data showed oil companies last increased prices of petroleum products in June 23, with an average uptick of P1.05 per liter for gasoline, P0.85 per liter for diesel and P0.30 per liter for kerosene. These adjustments followed varying increases enforced last June 16 and June 9.
On the flip side, Manila Electric Co., the country’s largest power distributor, announced reduction in bill rates this month, resulting into a P4 decrease in billing for the typical consumers of 200 kilowatt per hour.
Another month of tame inflation would be a welcome news for BSP Governor Benjamin Diokno, who surprised the market last Thursday with a whopping 50-basis point cut to policy rates to 2.25%, the lowest on record, in an attempt to lower borrowing costs and encourage businesses and consumers to borrow.
A high inflation environment, similar to 2018, would have made rate cuts unlikely, but the coronavirus disease-2019 (COVID-19) pandemic has battered economic activity so much so that demand tempered, leaving almost no reason to hike prices.
The target of rate cuts is to make bank loans more affordable for both consumers and businesses in a bid to fuel economic activity that had been paralyzed since mid-March by lockdowns meant to stem contagion.
The government only started easing movement restrictions in several parts of Luzon in June. President Rodrigo Duterte is scheduled to announce new quarantine regimes for the next 15 days later tonight.