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May Inflation Dips to 4.3 Percent

06.04.2010

Headline inflation dipped to 4.3 percent year-on-year in May from 4.4 percent in April.  The year-to-date average remained at 4.3 percent, well within the Government’s target range of 3.5-5.5 percent for 2010.  Core inflation, which excludes certain food and energy items to measure broad-based price pressures, also decreased slightly to 3.8 percent from 4.0 percent (revised) in the previous month.  Month-on-month headline inflation turned negative in May at 0.2 percent from 0.5 percent in April.     

May inflation went down slightly with the decline in non-food inflation, specifically  for utility rates.  Lower generation costs brought down electricity rates and the appreciation of the peso led to lower water rates.  Power distribution utilities reflected lower electricity costs from independent power producers and the Wholesale Electricity Spot Market while water utility companies passed on their savings to consumers in the second quarter through the foreign currency differential adjustment component of their bills.  Meanwhile, food inflation was unchanged in May.

According to Governor Amando M. Tetangco, Jr., the May inflation number, which was within BSP’s  forecast range for the month, affirms the recent Monetary Board decision to keep policy rates steady in the face of uncertain global economic prospects. Governor Tetangco emphasized that while supply-side risks appear to have lessened, the BSP will continue to closely monitor inflation developments to safeguard price stability.

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