Inflation slowed down to 2.9 percent in May from 3 percent in April, reflecting stable food prices and lower oil prices, the National Statistics Office reported Tuesday.

 

This gives the Bangko Sentral ng Pilipinas (BSP) elbow room to keep interest rates steady at record lows.

 

Lower inflation last month supports the latest assessment of generally well-behaved price movements, BSP Governor Amando Tetangco Jr. said in a text message to reporters. 

 

It was well within the central bank’s forecast of 2.5 percent to 3.4 percent, Tetangco noted.

 

“Lower utility and transport costs, among others, resulted in overall slower rise in prices,” he added.

 

“The country’s annual headline inflation rate settled to 2.9 percent in May from 3 percent in April,” according to the NSO.

 

“It resulted from the slower annual growth rates in the indices of housing, water, electricity and gas and other fuels, health, transport and education,” it said.

 

“Inflation a year earlier was 4.9 percent,” the NSO added.

 

Without the volatile food and energy items, core inflation would have advanced 3.7 percent in May from 3.6 percent in April, NSO data showed.

 

Monetary authorities would stay vigilant in light of global developments ahead of the next policy meeting on June 14, said Tetangco.

 

“Nevertheless we will continue to monitor developments, particularly in Europe and the US, to assess their potential impact on domestic price movements and on our own growth prospects to see if there is any need to make adjustments in our policy stance,” he added.

 

The current monetary policy stance of the central bank is on the right track, considering output grew 6.4 percent in the first quarter and inflation continues to slow down, BSP Deputy Governor Diwa Guinigundo noted.

 

"What merits greater vigilance and analytical care is the slight blip in core inflation," Guinigundo said.

 

Economist Trinh Nguyen of Hong Kong and Shanghai Banking Corp. expects Bangko Sentral to keep interest rates steady while monitoring price and external conditions in the coming months.

 

The HSBC economist noted inflation pressures tilting on the upside, saying domestic demand was high in the face of a 50-basis-point cut in interest rates during the first quarter.

 

Still, the economist is optimistic that inflation would stay within the bottom rung of Bangko Sentral’s target of 3 percent to 5 percent for the year. —VS, GMA News