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Inflation Update: Downward bias seen in year-end inflation
The projected softening of rice and oil prices may help ease overall inflation in the coming months.
By Metrobank Research
The Philippines’ headline inflation rose slower-than-expected to 3.9% year-on-year in May, in line with our estimate. This is a slight acceleration from the 3.8% recorded in April.
To address rice inflation, which remains to be the major contributory factor to headline inflation in May, the government is looking into reducing the duty rates on rice to 15% from the current 35%. The Philippine Statistics Authority (PSA) estimates that once implemented through an Executive Order, this will cut rice prices by approximately PHP 5 – PHP 7 per kilo.
We are revising our yearend average inflation forecast to 4.0% with a downward bias from the previous 4.0% on the back of the projected softening of upward pressures from rice and oil prices.
The monthly year-on-year inflation is expected to peak in July and anticipated to begin its downward trend in August. Thus, we maintain our view that the Bangko Sentral ng Pilipinas (BSP) will likely begin its monetary easing cycle in the 4th quarter of 2024 should the US Federal Reserve start cutting its rates in September 2024.
Inflation Update: Inflation settled within target in May at 3.9%
We have added a downward bias to our year-end inflation forecast.
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