‘Inflation to rise in June’

MANILA, Philippines ? Economists now expect an uptick in June inflation after easing for four straight months to a six-month low of 2.1 percent in May due to rising oil and food prices following the easing of lockdown measures to contain the coronavirus disease 2019 or COVID-19.

Security Bank chief economist Robert Dan Roces said inflation increased slightly to 2.2 percent last month due to higher gasoline, diesel, and kerosene prices as more economic activities resumed.

Effective June 1, the National Capital Region (NCR) transitioned into a general community quarantine after the entire Luzon was placed under enhanced community quarantine in the middle of March to prevent further spread of the deadly virus.

“Looser quarantine measures notwithstanding, consumption may likely be clustered around essential items for most of the second half, thus curtailing price pressures overall,” Roces said.

Roces said inflation would remain relatively benign for the rest of the year, averaging 2.1 to 2.2 percent after easing to 2.5 percent last year from 5.2 percent in 2018.

He said the Bangko Sentral ng Pilipinas (BSP) would likely maintain interest rates at current levels after a cumulative 175 basis points cut brought the overnight reverse repurchase rate at an all-time low of 2.25 percent.

“Also, with the policy rate now at 2.25 percent, the scope for further policy rate cuts may be limited in the meantime with the real interest rates nearing zero,” Roces said.

Meanwhile, Rizal Commercial Banking Corp. chief economist Micheal Ricafor said inflation could remain relatively stable and benign at familiar levels close to, or a little over two percent, in the coming months as economic recovery remains relatively fragile, locally and worldwide, after the COVID-19 lockdowns.

Ricafort said inflation  likely settled at 2.2 percent last month as economies locally and in many countries worldwide further re-open from lockdowns, which have been relaxed further starting the latter part of May and June, thereby leading to some gradual pick up in business and economic activities resulting to some pick up in demand and spending activities.

“Recent increases in fuel pump prices largely brought about by higher global oil prices as well as reflecting the higher tariffs on imported oil products to help fund COVID-19 programs,” Ricafort said.

He said global crude oil prices recently corrected higher to near four-month highs or since early March as many economies around the world further re-start their respective economies, while some pick up in local palay or rice prices have been seen recently.

For his part, Union Bank of the Philippine chief economist Ruben Carlo Asuncion expects a faster uptick of 2.3 percent for the month of June due to higher fuel prices over the last eight weeks and higher prices of rice.

Asuncion said the decline in liquified pertroleum gas (LPG) and electricity costs would not be enough to offset the uptick in oil and basic commodity prices.

The central bank’s Department of Economic Research sees inflation for June ranging from 1.9 to 2.7 percent as higher gasoline, diesel, and kerosene prices as well as more expensive rice due to supply bottlenecks contributed to positive price pressures last month.