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Philippine inflation slows in June, supports extended rate pause
Global Banking & Finance Review®
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By Karen Lema and Enrico Dela Cruz
MANILA (Reuters) -Philippine annual inflation eased for a fifth straight month in June, supporting expectations the central bank will keep rates unchanged for longer as food and transport cost pressures ease.
The consumer price index rose 5.4% in June, the statistics agency said on Wednesday, its slowest pace since April last year. The central bank, however, noted inflation risks remained tilted to the upside due to the potential impact of El Nino dry weather conditions and wage increases.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona told reporters on Wednesday the inflation rate in June was better than what the central bank had expected and “somewhat” supports the case for keeping interest rates steady for some time.
Remolona, who began his six-year term as BSP governor on July 3 will chair his first policy meeting on Aug. 17. The central bank kept its key policy rate steady at 6.25% at its last two meetings in May and June.
June’s inflation rate, which was below the 5.5% forecast in a Reuters poll, brought the year-to-date average to 7.2%.
The central bank projected inflation will gradually return to its 2%-4% target in the fourth quarter barring sudden supply shocks.
Remolona said the central bank may consider a rate cut if inflation fell below 4%, but added there were other factors at play like output growth and policy moves by the U.S. Federal Reserve.
ING economist Nicholas Mapa said in a tweet that moderating price pressures give the central bank space to extend the pause and keep rates steady for now.
(Reporting by Karen Lema and Enrico Dela Cruz; Editing by Martin Petty, Jacqueline Wong and Conor Humphries)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured by the Consumer Price Index (CPI).
A central bank is a financial institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
Monetary policy refers to the actions taken by a central bank to control the money supply and interest rates to achieve macroeconomic goals such as controlling inflation, consumption, growth, and liquidity.
The Consumer Price Index (CPI) measures the average change over time in the prices paid by consumers for a basket of goods and services, serving as an indicator of inflation.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage of the principal amount. They are influenced by central bank policies and economic conditions.
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