Philippine headline inflation continues to decelerate in May, likely to average 1.9 pct through 2020

Philippine’s headline inflation continues to slow down. On a year-on-year basis, the consumer price inflation eased to 2.1 percent from April’s 2.2 percent. Sequentially, the consumer price inflation rose 0.1 percent in May, as compared with April’s -0.1 percent. Lower food and housing and utilities costs were countered by higher transport prices. Meanwhile, core inflation remained the same at 2.9 percent year-on-year.

“We expect inflation to average 1.9 percent through the year, a touch below the BSP’s 2–4 percent target band”, said ANZ in a research report.

It is expected to continue to be a non-issue for monetary policy for the rest of 2020. The focus of monetary policy is likely to be to directly underpin growth and help smooth funding of the fiscal stimulus measures.

“The pressure on the real economy is becoming very evident. In April, the unemployment rate (also reported today) had jumped to record high of 17.7 percent, despite a fall in the labour participation rate. Depending on the durability of higher unemployment, the impact on aggregate demand could be very significant”, added ANZ.