Q2 inflation eases further, upside risks remain

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Headline inflation eased to 1.7 percent in the second quarter this year as price increases in food and non-food items decelerated, the central bank said on Thursday.

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This brought inflation for the first half to an average of 2 percent, or within the 2-percent to 4-percent target of the Bangko Sentral ng Pilipinas (BSP).

In its second quarter 2015 inflation report, the BSP noted that last year, consumer prices had risen at a faster clip of 2.5 percent in the first quarter and 4.4 percent in the second quarter.

According to the report, food inflation continued to ease to 3.1 percent in the second quarter from 5 percent in the previous quarter as most food commodities—particularly rice, corn, meat, milk, oils and fats, fruits, and vegetables—posted slower price increases due to ample domestic supply.

“The continued downtrend in rice prices could be attributed in part to the summer harvest in a number of rice-producing provinces as well as the completion of delivery of an additional 500,000 metric tons of rice imports,” the BSP report said.

Non-food inflation came in at 0.5 percent in the second quarter compared to 0.6 percent in the first quarter.

Price increases in electricity, gas and other fuels, and operation of personal transport equipment continued to decline in year-on-year terms resulting from lower generation charges and price reductions in domestic petroleum products, respectively.

Meanwhile, the central bank said the latest baseline inflation forecasts show that inflation is likely to settle within the lower half of the target range of 3.0 percent, plus or minus 1.0 percentage point, for 2015 and 2016.

“Risks to the inflation outlook continue to be broadly balanced. Pending petitions for power rate adjustments and the impact of stronger-than-expected El Niño dry weather conditions on food prices and utility rates are seen to pose upside risks to the outlook,” it said.

Downside risks, however, could stem from slower-than-expected global economic activity.
“Inflation expectations also remain well-contained following recent inflation outturns,” the BSP concluded.

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