April inflation stabilizes at 4.5%

The consumer price index rose 4.5% year on year in April. – STAR PHILIPPINE / MICHAEL VARCAS

INFLATION remained stable in April, while core inflation returned to its lowest level in five months, leading economists to expect the central bank to keep rates on hold during the month. from next week’s policy meeting.

Preliminary data from the Philippine Statistics Authority released on Wednesday showed that the consumer price index rose 4.5% from a year ago last month, unchanged from March but faster than 2.2% in April 2020. Price increases for staple foods like rice and vegetables have slowed, helping offcreated a spike in transportation costs caused by rising oil prices.

Headline inflation in April was below median of 4.7% according to poll Business world at the end of last week, and settled into the 4.2-5% estimate of Bangko Sentral ng Pilipinas (BSP).

Headline inflation rate in the Philippines (April 2021)

Since the start of the year, inflation has averaged 4.5%, slightly above the BSP’s 2-4% target, as well as its inflation forecast of 4, 2% for the year. April was the fourth month in a row that inflation exceeded this year’s target.

Inflation eased in the food and non-alcoholic beverage indices to 4.8% in April from 5.8% in March; and alcoholic beverages and tobacco at 12% by 12.1%.

In contrast, annual increases were noted in housing, water, electricity, gas and other fuels (1.5% versus 0.9%); provide, household equipment and routine maintenance of the house (2.1% against 1.9%); health (3.1% against 2.9%); transport (17.9% against 13.8%); communication (0.3% of 0.2%); and catering and miscellaneous goods and services (3.4% against 3.1%).

The following indices experienced stable inflation compared to the previous month: clothing and footwear (1.6%); leisure and culture (-0.6%); and education (1.1%).

Food inflation slowed to 5% in April from 6.2% in March, although still faster than 3.4% last year.

Core inflAation, which is used to determine price trends by eliminating volatile food and fuel prices, stood at 3.3% in April, down from 3.5% the month before. Yet that was higher than core inflation of 2.9% in April 2020.

Core inflLast month’s ate was the slowest since 3.2% in November 2020, matching 3.3% Figure registered in December 2020.

Core inflation so far has averaged 3.4% this year, compared to 3.1% in the comparable four months of 2020.

At the same time, inflation for the poorest 30% of income-earning households stood at 4.9% in April, slower than 5.5% recorded the previous month, but still faster than 2, 9% in April 2020.

Inflation for the poorest 30% takes into account the spending habits of this income segment, assigning heavier weights to necessities.

“The latest result is in line with expectations that inflation would remain high this year, due to pressure on the supply side, before settling near the middle of the target range in 2022,” said the governor of BSP, Benjamin E. Diokno, in a message from Viber to reporters. .

Mr. Diokno also said that “the timely approval” of the temporary reduction in tariffs on imported pork implemented last month would help ease price pressures.

President Rodrigo R. Duterte signed Decree 128 last month, which reduced tariffs on pork imports for a year.

PSA data showed that pure pork prices in Metro Manila averaged P360.20 per kilogram in April, P328.71 per kilogram in March, and P322.90 per kilogram in February. However, that figure was just under 367.7 P per kilogram in January.

Mr. Diokno noted that inflexpectations “remain firmly anchored” inflaation targets.

“The ongoing pandemic continues to pose downside risks to theflprospects and prospects for growth. However, improvements in external demand as well as the continued roll-out of the government’s COVID-19 (coronavirus 2019) vaccination program and other stimulus measures will strengthen the economic recovery, ”he said.

Benchmark interest rates are at a historically low level of 2% for the overnight repo facility, while overnight deposit and loan rates are respectively 1.5% and 2.5%. The BSP Monetary Board has kept these parameters unchanged for three consecutive meetings as it continues to support the economy amid the high risks associated with the surge in COVID-19 cases.

Economists continue to see the central bank keeping an accommodative stance at the next monetary policy meeting on May 13.

“We expect BSP to remain on hold throughout 2021 to support the economy and we believe inflation will start to slow further in May as supply side issues are resolved with remedies from the supply side. the offer, ”said Nicholas Antonio T, senior economist at ING Bank NV. Mapa said in a statement.

In an e-mail to Business worldJohn Paolo R. Rivera, economist at the Asian Institute of Management, said inflation in the coming months would depend on supply.

“It will depend on how the control of the COVID-19 pandemic progresses; stop the consequences of African swine fever; manage factors affecting the supply of basic necessities and essential services such as transport and communication; and external shocks like oil price volatility, ”he said.

“At the current pace of the economy, it is very likely that key rates will remain constant until a deceleration offlation manifests itself in the target bands, ”he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the easing of inflation for the lower-income 30% of households and the decline in core inflation “signaled effects. second-round inflation rates ”and“ would contribute to the pursuit of a more accommodative monetary policy ”.

ANZ Research economists Rini Sen and Sanjay Mathur expect the BSP to remain accommodative throughout the year, given the slowing economic recovery following tighter lockdowns imposed from mid -March.

“Support will likely come through regulatory and liquidity channels and not through rates, at this time,” they said in a note.

HSBC Global Research economist Noelan Arbis said the pressure on the BSP to act against inflation had “dissipated” given the easing of inflation.flationic tendency.

“We believe that a further cut in rates at this point would do little to stimulate the economy given the ongoing lockdowns, while it is still too early to begin policy normalization,” he said. -he declares.

“BSP Governor Benjamin Diokno recently noted that a further reduction in the reserve requirement ratio (RRR) was on the table, but with sufficient liquidity in the market, we believe it is not necessary. We expect the RRR to stay at 12% this year, ”he added. – Lourdes O. Pilar with entries from Luz Wendy T. Noble

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