By Luisa Maria Jacinta C. Jocson, Senior Reporter

HEADLINE INFLATION eased to an over five-year low in May, as utility costs rose at a slower pace, the Philippine Statistics Authority (PSA) said on Thursday.

The consumer price index (CPI) rose to 1.3% in May, slowing from 1.4% in April and 3.9% in the same month a year ago, preliminary data from the PSA showed.

This matched the 1.3% median estimate yielded in a BusinessWorld poll of 17 analysts conducted last week and was within the Bangko Sentral ng Pilipinas’ (BSP) 0.9%-1.7% forecast range for the month.

The May print was the lowest inflation rate in five and a half years, or since the 1.2% print posted in November 2019.

May also marked the fourth straight month of deceleration and tenth straight month of inflation settling within the 2-4% target band.

For the first five months, inflation averaged 1.9%. The BSP expects inflation to settle at 2.3% for the full year.

Core inflation, which discounts volatile prices of food and fuel, was steady at 2.2% in May from a month ago. This brought year-to-date core inflation to 2.3%.

“The latest inflation outturn is consistent with the BSP’s assessment of a manageable inflation environment over the policy horizon with a downward revision in baseline inflation forecasts,” the central bank said, noting the continued easing of commodity price pressures.

National Statistician Claire Dennis S. Mapa said the deceleration in the May print was mainly due to the slower annual increment in the index of housing, water, electricity, gas and other fuels.

The index, which accounted for a 68.4% share to the downtrend during the month, eased to 2.3% in May from 2.9% in April. It was also the top index contributing to May inflation, accounting for a 37.1% share.

Electricity inflation slowed to 2.8% in May from 5.4% a month ago.

After three months of straight hikes, Manila Electric Co. lowered the overall rate for May by P0.7499 per kilowatt-hour (kWh) to P12.2628 per kWh from P13.0127 per kWh in April.

Water costs also eased to 5.7% in May from 6.3% in the previous month.

The transport index declined at a faster pace to 2.4% in May from the 2.1% drop a month prior. This as the inflation of passenger transport by sea slowed to 42.4% from 68.8%.

Gasoline prices also slid to 13.2% in May from the 12.4% drop in April, while diesel slipped to 9.3% from the 8.3% drop a month ago.

The restaurants and accommodation services index also decelerated to 2% in May from 2.3% in April.

Meanwhile, the heavily weighted food and nonalcoholic beverages index continued to be a major contributor to inflation during the month, with a 25.7% share of the overall print.

The index was steady at 0.9% in May from April, with food inflation also remaining the same at 0.7%.

Prices of pig meat quickened to 11.9% in May from 10.3% in April. This was the top contributor to the May CPI, contributing 25% or 0.3 percentage point.

Rice inflation remained negative, falling to 12.8% in May from the 10.9% decline a month prior.

“The average (rice) inflation from January to May is -7.7%. So, for the first five months of 2025, it has been negative and there are expectations that it will continue to be negative in the coming months because we see the prices of rice are declining per kilo,” Mr. Mapa added.

Meanwhile, inflation in the National Capital Region (NCR) eased to 1.7% in May from 2.4% in April. Outside NCR, inflation remained steady at 1.2% in May.

ZERO INFLATION

Meanwhile, inflation for the bottom 30% of income households posted 0.0% inflation in May from 0.1% in April and 5.3% a year ago.

This brought the year-to-date inflation for the bottom 30% to 1%.

Food and nonalcoholic beverages for the bottom 30% dropped to 1.6%, accounting for an 83.6% share. Transport inflation also registered a decline of 1.9%, with an 11.6% share.

“A major contributor was food items, particularly cereals. Rice for the bottom 30% is at -14.7%. So, it was a significant decline,” Mr. Mapa said.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that rice prices comprise the bulk of the bottom 30%’s CPI.

“Since the poorest Filipinos have a bigger budget allocation for rice and other basic necessities, they are the biggest beneficiaries of lower rice prices that they are eligible to avail,” he said.

INFLATION OUTLOOK

At the same time, the BSP said risks to the inflation outlook continue to remain broadly balanced from this year to 2027.

“Upside pressures come from possible increases in transport charges, meat prices, and utility rates,” it said.

“Meanwhile, downside risks are linked to the continuing effects of lower tariffs on rice imports and the expected impact of weaker global demand.”

Department of Economy, Planning, and Development Undersecretary for Policy and Planning Rosemarie G. Edillon is optimistic that inflation will remain within the 2-4% band for the year.

“We remain committed to executing the necessary measures to keep prices low and stable,” she said in a statement.

The government will implement “targeted policies aimed at mitigating inflationary pressures and safeguarding the purchasing power of Filipino families,” she added.

For his part, Agriculture Secretary Francisco P. Tiu Laurel, Jr. has said they are working to ensure rice prices remain contained.

“We are expanding the reach of the P20 rice program and are studying a reduction in the suggested retail price for imported rice — the national staple that dominates Filipino tables, especially among the poor,” he said in a statement.

Mr. Tiu-Laurel said the President has directed the Agriculture department to implement the subsidized rice initiative through June 2028.

MORE RATE CUTS?

Meanwhile, the BSP said there is still room to continue its easing path despite external headwinds.

The Monetary Board flagged the challenging external environment, which could “dampen global growth prospects, and thereby pose a downside risk to global commodity prices and domestic economic activity.”

“On balance, the more manageable inflation outlook and the downside risks to domestic economic activity allow for a shift toward a more accommodative monetary policy stance,” it added.

The Monetary Board in April cut interest rates by 25 basis points (bps), bringing the benchmark to 5.5%. It has so far slashed borrowing costs by a total of 100 bps since it began its easing cycle in August.

“Slow food and utility inflation coupled with deflation in transport costs nudged the headline lower. Looks like the door remains wide open for the BSP to cut rates in June,” Nicholas Antonio T. Mapa, a senior economist at the Metropolitan Bank & Trust Co., said.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said they expect the central bank to deliver another 25-bp cut later this month.

“We’re sticking to our below-consensus view that the BSP’s benchmark rate will end 2025 at 4.75%, implying three more 25-bp rate cuts, including the next in two weeks’ time.”

BSP Governor Eli M. Remolona, Jr. has said a 25-bp cut remains on the table at the Monetary Board’s June 19 policy review.

On the other hand, HSBC economist for ASEAN Aris D. Dacanay said the central bank could consider holding rates steady.

“Our baseline scenario is for the BSP to pause its easing cycle in June as the central bank waits for more details regarding the US’ proposed tariff measures,” he said.

“The BSP does have the privilege to take a measured approach given how insulated the economy is to any headwind in trade.”

However, the well-below target inflation increased the chances of a June cut, he said, especially with weaker-than-anticipated growth in the fourth quarter.

“The peso’s relative strength may have also given the BSP room to cut policy rates regardless of whether the Fed cuts rates or not. That being said, the June Monetary Board meeting will likely be a tough call.”

He said other risks to inflation that need monitoring include the bill seeking a P200 across-the-board minimum wage hike for workers in the private sector, which was approved by the House of Representatives on third and final reading on Wednesday.

“Furthermore, policymakers are mulling the possibility of raising the tariff rates on rice based on the seasonality of the crop. If this materializes, there might be large implications in the inflation outlook, enough for the BSP to reconsider the pace of its easing cycle,” Mr. Dacanay added.