Philippines: High power bills, fuel costs likely pushed up inflation to 4.8% in May — BSP

• May 31, 2021

MANILA, Philippines — Rallying oil prices and power rates likely pushed up inflation in May, putting it beyond government target for fifth straight month, the Bangko Sentral ng Pilipinas reported Monday.

In a statement, the BSP’s Department of Economic Research pegged this month’s inflation at 4-4.8%. If the upper-end of the forecast range is realized, it would be faster than 4.5% clocked in April.

The BSP’s projection means it still expects inflation to settle above its 2-4% annual target, a trend that started in January when a shortage of pork meat amid the African Swine Fever outbreak became more pronounced as the virus remains uncontained since 2019. State statisticians will report the May inflation figures on June 4.

Explaining its forecast, the central bank said still expensive meat products and higher local pump prices contributed to inflation in May. Data from the energy department showed local oil companies implemented four price adjustments in May, mostly increases, as domestic prices track a global rally fueled by economic recovery as vaccination rates picks up.

On top of that, power rates in areas served by Meralco also provided some upward price pressure this month. The country’s largest power distributor increased electricity rates by P0.1853 per kWh in May, equivalent to an increase of around P37 in the total bill of a household with monthly consumption of 200 kWh, as the sweltering summer sun pushes up power demand in the country.

But the central bank said May inflation could be tempered by cheaper costs of rice, vegetables, and fish due to “improved supply conditions”. A strong peso, which could bring down the country’s import bill, also help offset any price hikes, it added.

As it is, a runaway inflation would pose a risk to the BSP’s monetary response to the pandemic, which include flooring interest rates to historic-low in a bid to encourage spending in the pandemic-stricken Philippine economy. So far, the central bank has vowed not to prematurely withdraw support to the economy, saying inflation is unlikely to become a big headache this year.

“Moving forward, the BSP will remain watchful of economic and financial developments to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” the BSP said.

Source: https://www.philstar.com/business/2021/05/31/2102114/high-power-bills-fuel-costs-likely-pushed-inflation-48-may-bsp