MANILA, JUNE 6, 2007
(STAR) - The nationwide inflation rate stood at 2.4 percent in May, inching up from 2.3 percent in April.

It was the second consecutive month inflation has crept up but still remains well within the central bank’s forecast of between 2.1 percent and 2.8 percent.

Core inflation, which excludes certain food and energy items, was steady at 2.6 percent in May.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the May inflation rate “confirms the central bank’s assessment of some short-lived pressure from the El Niño dry spell and creeping oil prices.”

“These somewhat dampened the decreasing base effect of VAT on inflation,” Tetangco said, referring to the one-time impact of the increase in the value added tax rate last year. “We expect continuing environment of low and stable inflation,” Tetangco said.

Inflation rates for all commodity groups eased in May, except for fuel, light and water, which rose to four percent from 2.2 percent in April.

The inflation rate for the food, beverage and tobacco group — the biggest component of the consumer price index basket — slowed to 2.6 percent from 2.8 percent.

Tetangco said that despite the slight rise, “overall, the inflation outlook remains favorable.”

For the first five months of the year, the average inflation rate stood at 2.7 percent.

Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) director-general Romulo L. Neri said the January to May inflation rate of 2.7 percent is still below the Development Budget Coordination Committee (DBCC) projections of four percent to five percent.

Tetangco said the May inflation rate confirmed the BSP’s assessment of some short-lived pressure from El Niño and the creeping oil prices.

The NSO said the pick-ip in the year-on-year headline inflation rate was mainly due to the upward movement in the inflation rate for fuel, light and water (FLW) at four percent from 2.2 percent in April.

Excluding selected food and energy items, the NSO said the core inflation remained at 2.6 percent for three consecutive months.

According to the NSO, the inflation rate of 2.1 percent was retained in the National Capital Region (NCR) for three months now while the inflation rate in Areas Outside the National Capital Region (AONCR) went up by 0.1 percentage point to 2.5 percent in May from 2.4 percent in April.

Tetangco explained that the base effect of the increase in the value-added tax (VAT) rate was beginning to wear off and prices also had to contend with the increase in oil prices.

According to Tetangco, the BSP also noted that supply conditions are “less favorable” because of constraints created by the dry spell in the country’s agricultural areas.

“These were, of course, cushioned by the strong peso,” Tetangco said, adding that imports became relatively cheaper since the peso had appreciated against the dollar.

Tetangco said it also helped that monetary policies had been cautious last year, leading up to tamed inflationary expectation this year. – with AFP

Chief News Editor: Sol Jose Vanzi

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