Philippine inflation slows in June, supports extended rate pause

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.

The Bangko Sentral ng Pilipinas (BSP) said the slower pace of price increases was consistent with its expectation inflation will gradually return to its 2%-4% target in the fourth quarter barring sudden supply shocks.

Last month’s inflation rate, which was below the 5.5% forecast in a Reuters poll, brought the year-to-date average to 7.2%.

“The BSP stands ready to adjust the monetary policy stance as necessary to prevent the further broadening of price pressures,” it said in a statement.

Core inflation, which strips out volatile food and fuel items, slowed to 7.4% from 7.7% in May.

The central bank kept its key policy rate steady at 6.25% at its last two meetings in June and May, and it has signalled the rate could stay there longer with inflation on an easing trend.

It next meets on Aug. 17 under newly appointed BSP Governor Eli Remolona, who took the helm of the central bank on July 3.

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.

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