June’s 5.2% inflation rate highest in 2 years

The rise in prices of basic services and commodities was the highest for more than two years at 5.2 percent in June defying expectations of the Bangko Sentral ng Pilipinas (BSP) that inflation pressures were easing.

The figure was up from five percent in May and represents the quickest rate of price increase since the 5.6 percent increase recorded in April 2009, National Statistics Office (NSO) data showed.

“Higher annual increments were recorded in alcoholic beverages and tobacco; clothing and footwear; housing, water, electricity, gas and other fuels; transport, recreation and culture; education; and restaurants,” it said.

The NSO said the inflation rate in June was also higher than the 3.6 percent increase a year ago.

In the first six months, inflation stood at 4.7 percent.

Using a 2000 base year, the NSO said inflation rose 4.6 percent to 4.5 percent in May.

The June inflation was within the BSP projection of 4.6 percent to 5.5 percent.

The NSO said data users could expect two sets of the consumer price index as the new series would be issued simultaneously with the 2000 based series until December 2011.

“Upward adjustments in tuition fees and higher prices of food items particularly chicken, cooking oil, fruits and vegetables raised the overall month-on-month growth of the consumer prices,” the NSO said.

It also said that the increased charges for electricity rates and price gains in alcoholic beverages and tobacco and selected construction materials also contributed to the uptrend.

Benjamin Diokno, former Budget secretary during the Estrada administration, said the June inflation rate of 4.6 percent, using 2000 base year, was well within the range being targeted by monetary authorities.

“It should convince BSP to keep policy interest rates unchanged in the meantime. With a tight fiscal policy, a relatively accommodative monetary policy is still needed to provide support to a weak economy,” he said.

Diokno, who is also an economist from the University of the Philippines, said three factors may explain the lower-than-expected inflation rate: the easing of oil and oil product prices in the world market; the decelerating domestic economy which puts downward pressure on commodity prices; and the slightly appreciating peso.

“Inflation rate is unlikely to breach the 5 percent level in the next few months given the slowing world economy and the stabilizing oil prices, except in the event of a major, unforeseen calamity which could affect food prices. Oil prices will inch down to less than per barrel in the near term,” he said.

The central bank earlier kept key policy rates for overnight deposits to 4.5 percent. The next policy meeting is on July 28.

After the central bank raised its key lending rates by a total of half-percentage-point in March and May, BSP Gov. Amando Tetangco had said last month that inflation had slowed.

Tetangco said Tuesday that the central bank was monitoring whether the price increases were becoming more broad-based.

“We will ensure that our monetary policy stance remains appropriate to sustain non-inflationary economic growth,” Tetangco said.

The bank’s policy-setting monetary board next meets on July 28.

The overnight borrowing rate stands at 4.5 percent and the overnight lending rate is at 6.5 percent.