Philippines inflation still peak – think tank

MANILA, Philippines — Hitting the peak of elevated inflation in the country is still far, especially as commodity prices are still soaring as global tensions remain.

In a report, think tank Capital Economics said headline inflation – the increase in the consumer price index – likely soared to 5.2 percent in May.

Inflation jumped to 4.9 percent in April, hitting its highest rate in over three years, amid continued price pressures.

Capital Economics’ forecast is slightly below the market consensus of 5.4 percent. It is also at the lower end of the central bank’s five to 5.8 percent expectation for the month.

The government will release the May inflation data this June 7.

“We think inflation will remain elevated in the near term, due to a further increase in domestic fuel prices and higher prices of key food items,” senior Asia economist Gareth Leather said.

“Inflation should peak over the next couple of months and then start to fall back in the second half of the year,” he said.

Global commodity prices have started to ease and a lower base from the first half of last year slips out of the annual comparison.

Leather maintained that inflation would return to the four percent level toward the end of the year and sharply decline by 2023.

Amid this backdrop, Leather said the pressure on the central bank to continue tightening beyond end-2022 is likely to ease.

“The emphasis is instead likely to shift to supporting the economic recovery. We think that the tightening cycle will conclude at the end of 2022,” he said.

Last month, the Bangko Sentral ng Pilipinas (BSP) delivered its first rate hike in more than three years with 25 basis points, bringing the benchmark rate to 2.25 percent from an all-time low of two percent.

The BSP raised rates amid the stronger-than-expected first quarter economic performance and as inflation remains elevated.