Headline inflation continued to fall in May, dropping to 3.3 percent year-on-year from 4.8 percent in April, the lowest since November 2007. This brings the year-to-date average down to 5.7 percent from 6.4 percent a month earlier. Likewise, core inflation, which excludes specific food and energy items to measure generalized price pressures, was lower at 4.4 percent year-on-year in May from 5.0 percent in April. Month-on-month headline inflation was negative 0.1 percent in May compared to 0.5 percent in April.
All major commodity groups registered lower inflation rates in May. Lower food inflation accounted for the bulk of the decline in headline inflation, with slower price increases of such major items as rice, meat, corn, fruits and vegetables, and miscellaneous food. Fuel, light, and water inflation was more negative due to lower electricity and LPG costs while services inflation went down as transportation and communication services inflation remained in negative territory.
Governor Amando M. Tetangco, Jr. observed that the inflation outturn was at the low-end of the 3.3-4.2 percent forecast of the BSP for May. The favorable inflation trend observed so far this year provides the BSP with some margin of flexibility in monetary policy management. At the same time, he noted that the BSP’s monetary policy actions necessarily take a medium-term perspective, and the outlook for inflation remains the key driver of monetary policy settings. Against the backdrop of an economic slowdown, the BSP will continue to focus on keeping prices stable while providing support to domestic output growth.