ANNUAL inflation likely held steady in May as food prices stabilized and oil prices fell, which coupled with strong growth data this week cements views the central bank will leave interest rates on hold possibly for the rest of the year.
The consumer price index last month may have risen 3 percent from a year earlier, unchanged from April's increase, according to the median of forecasts from 11 economists polled by Reuters.
That would be well within the central bank's forecast of 2.5 to 3.4 percent.
On a month-on-month basis, inflation may have slowed to 0.3 percent from 0.8 percent in April, the same poll showed.
The drop in oil prices, due to slowing global demand as the debt crisis in the euro zone deepens, has helped dampen price pressures in Southeast Asian economies, most of which are heavily reliant on fuel imports. That will give policymakers more room, if needed, to focus on ways to spur flagging growth.
"Inflation is unlikely to be a problem in the coming quarters amid the specter of slowing global growth," said Eugene Leow, economist at DBS in Singapore.
A benign inflation outlook, coupled with quarterly growth that hit a two-year high in January to March, sealed
expectations the Bangko Sentral ng Pilipinas (BSP) will keep its key overnight borrowing rate at a record low of 4
percent at its June 14 meeting.
Growth in the first quarter was powered by government spending, domestic demand and an export rebound, though analysts cautioned it may lose momentum quickly given headwinds from Europe.
Most analysts in a Reuters quarterly poll in April expected the benchmark rate to be kept at 4.0 percent for the whole year on manageable inflation and with authorities seeking to protect domestic demand amid global economic turmoil. (ABS-CBNnews.com)