Philippines consumer price index-led inflation for the month of May is likely to remain below the central bank’s target of 2 percent as prices of major commodities remain subdued amid a weak global environment. The Philippine Statistics Authority is scheduled to release the inflation report for May on June 7, Tuesday.
Core CPI and core inflation are expected at 1.3 percent y/y and 1.6 percent respectively. CPI inflation has remained below 2 percent for 13 consecutive months and it is expected that at least another 3-4 months of below 2 percent inflation reading, DBS reported.
Nicholas Antonio T. Mapa, research officer at the Bank of the Philippine Islands (BPI), said food costs are likely to rise by 2.2 percent from a year ago the recent dry spell caused vegetable and fruit prices to spike, coupled with a tempered hike in rice prices as the government brought in additional supply as buffers.
According to recent comments by the Bangko Sentral ng Pilipinas (BSP), it seems less likely that inflation will miss the target this year as the low base effect due to disruption in oil prices is likely to dissipate towards the end of this year. However, the BSP remains concerned about the volatility in food prices.
Meanwhile, the demand picture remains robust which is likely to boost consumer inflation in the near term.
“We reckon that short-term rates are likely to go up as the BSP continues to mop out excess liquidity in the market by issuing the short-term term deposit facilities,” DBS mentioned in a research note.
However, the central bank is unlikely to loose monetary policy as of now. Rather, a hike in interest rate is expected as the next move in the future policy meet.
The material has been provided by InstaForex Company – www.instaforex.com