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UPDATE 1-Philippine inflation quickens in June as coronavirus lockdown eased

Published 07/07/2020, 09:58 AM
Updated 07/07/2020, 10:00 AM

* June annual inflation at 2.5% vs 2.1% in May
* Transport index, utilities drive inflation higher

(Adds detail, context, economist comment)
By Neil Jerome Morales and Enrico Dela Cruz
MANILA, July 7 (Reuters) - Philippine inflation picked up
faster than expected in June as economic activity gradually
resumed with the easing one of the world's longest coronavirus
lockdowns, driving food and fuel prices as well as the transport
index higher.
The consumer price index rose 2.5% in June from a year
earlier PHCPI=ECI , after posting a four-month deceleration to
2.1% in May, the Philippine Statistics Authority said on
Tuesday.
The headline figure was near the upper end of the central
bank's forecast range of 1.9% to 2.7% for the month, and faster
than the median 2.2% estimate in a Reuters' poll.
Inflation averaged 2.5% in the first six months of the year,
below the mid-point of the official 2%-4% target.
Core inflation, which excludes volatile food and fuel
prices, was 3.0%, up from 2.9% in May PHCPXY=ECI .
Despite looser restrictions, however, economists expect
domestic consumption to remain sluggish in the second half,
keeping price pressures in check.
The Bangko Sentral ng Pilipinas (BSP) expects inflation to
average 2.3% this year and 2.6% in 2021, well within the 2%-4%
target for both years.
After slashing its benchmark interest rate PHCBIR=ECI by a
total 175 basis points this year to 2.25%, BSP Governor Benjamin
Diokno has said the central bank remains committed to deploying
a full range of monetary instruments and regulatory relief
measures as needed to support growth. The benign inflation will allow the central bank to keep its
accommodative stance, but further rate cuts "are off the table
for the time being", said Nicholas Mapa, senior economist at
ING.
"With the BSP's real policy rate now negative (-0.25%), we
reiterate our expectation that the central bank will refrain
from cutting policy rates further and look to additional
liquidity enhancement measures should the economy needs more
stimulus," he said.

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