MANILA: The Philippine central bank on Tuesday (May 6) signalled further monetary easing ahead after inflation slowed to the lowest level since 2019, and warned of a "more challenging external environment.”
Consumer prices rose 1.4% last month from a year earlier as rice costs continued to drop, the Philippine Statistics Authority said. That was the lowest rate since November 2019 and was below the 1.8% median estimate in a Bloomberg News survey.
"The more manageable inflation outlook and the downside risks to growth allow for a shift toward a more accommodative monetary policy stance,” the Bangko Sentral ng Pilipinas said in a statement after the release of the latest inflation data.
"Looking ahead, the BSP will continue to take a measured approach in deciding on further monetary easing.”
Rice prices fell 10.9% in April, declining for a fourth straight month. The government declared a food security emergency in February to further bring down prices of the national staple and last week announced plans to sell some of its rice inventories at heavily subsidized prices.
National Statistician Dennis Mapa said that plan will likely have a significant impact on inflation for May.
The central bank said the risks to the inflation outlook continue to be broadly balanced for this year through 2027, but noted the "more challenging external environment” which may pose a "downside risk to domestic economic activity.”
The price data would help the central bank - which had forecast April inflation to come in within a range of 1.3% and 2.1% - to continue cutting its key interest rate for the rest of the year.
The BSP lowered its benchmark rate last month and signalled further policy easing ahead as the risks of a global slowdown due to higher US tariffs confront the South-East Asian nation.
BSP Governor Eli Remolona last month said that while he sees more rate cuts this year, he doesn’t expect it to happen at every policy meeting. The central bank’s Monetary Board will meet next on June 19.
The Philippines’ benchmark stock index edged higher after the inflation data release, while the peso was little changed against the US dollar.
"The combination of low inflation, weaker growth prospects, and a relatively resilient peso together give Bangko Sentral ng Pilipinas the green light to continue easing,” said Tamara Henderson, an economist with Bloomberg Economics.
She sees another 25-basis point cut in the central bank’s key rate at the June meeting. - Bloomberg
