Inflation settles at 4.5% in April, fastest in over 6 yrs

Headline inflation continued to move at a faster rate of 4.5 percent last April, compared with 4.3 percent March and 3.2 percent in April 2017, the Philippine Statistics Authority, reported on Friday.

“It’s the fastest since Nov. 2011 when inflation hit 4.7 percent,” said Guian Angelo Dumalagan, market economist at Land Bank of the Philippines.

“The rise in inflation is expected given the recent hike in excise taxes, the depreciation of the peso, and the surge in oil prices,” Dumalagan noted.

People who benefited from the the cut in personal income taxes might find themselves able to hurdle the increase in prices, but lower income households or those who are already tax exempted might experience a significant deterioration in their purchasing power, the economist noted.

“I am hopeful, however, that the unconditional cash transfer program of the government will address this issue,” Dumalagan said.

The statistics office said the uptrend can be attributed to higher annual increases in the indices of the following commodity groups:

• Alcoholic Beverages and Tobacco (20.0%)

• Clothing and Footwear (2.2%)

• Housing, Water, Electricity, Gas, and Other Fuels (3.0%)

• Furnishing, Household Equipment and Routine Maintenance of the House (2.8%)

• Health (2.8%)

• Transport (4.9%)

• Recreation and Culture (1.5%)

• Restaurant and Miscellaneous Goods and Services (3.4%)

“The annual inflation for food alone index at the national level eased to 5.5 percent in April 2018. Its annual rate in the previous month ... registered at 5.7 percent and 3.6 percent in April 2017,” the statistics office said.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said in a separate text message to reporters that the April inflation is on the high side of the central bank’s forecast.

“These are the relevant factors to consider at the policy review next week in determining the necessity and shape of a measured response to halt potential build up in inflationary expectations,” Espenilla said.

Inflation is among the key considerations of the BSP on whether it will tweak policy rates. The policy-setting Monetary Board is scheduled to meet on May 10 to decide on the matter.

On the other hand, Ruben Asuncion, chief economist at Union Bank of the Philippines, said “it is fitting to note that the annual food inflation index at the national level has actually eased to 5.5 percent from 5.7 percent last month.”

“This maybe an important consideration for the rate hike this May 10th. Thus, I am expecting the BSP to hold and still see by at least this month if inflation will continue to slow,” Asuncion noted.

Dumalagan, likewise, said the spike in inflation above the 4.3-percent median estimate of the BSP increases the likelihood of a rate hike in May or June this year. — With Ted Cordero/VDS, GMA News