By Katherine K. Chan, A reporter
HEADLINE inflation came in lower than expected in May as pressure on transportation costs eased following several pump price cuts during the month, the Philippine Statistics Authority (PSA) reported.
Inflation reached 6.8% in May, down from 7.2% in April but up from 1.3% in the same month last year, according to PSA data.
This marked the first time in a year or since November 2025 that headline printing cooled month-on-month, and it was the slowest pace in two months or since 4.1% in March.
May’s reading was another surprise as a BusinessWorld survey of 16 economists conducted last week showed an average of 7.9% for the month.
It was also below the Bangko Sentral ng Pilipinas’ (BSP) forecast of 7.1-7.9%.
Still, May marks the third month in a row that inflation has been the headliner of the central bank’s 2%-4% target, making the year-to-date average inflation rate above the target of 4.5%.
The decrease in the rate of inflation last month occurred at a time when the country saw a slight increase in the price of fuel, food, and utilities related to electricity, said National Statistician Claire Dennis S. Mapa.
“The first is transportation. We all know that pump prices change every week and our volatility is very high. But the overall average for May is lower than April,” he told a news conference in mixed English and Filipino on Friday.
Transport inflation, which accounted for 70.3% of overall inflation in May, eased to 16.2% during the month from 21.4% in April as diesel and gas prices rose at a slower pace.
Diesel inflation fell sharply to 58.5% from 122.7% last month, while petrol inflation eased to 51.6% from 59.6% in April.
In May, local gas stations reduced the cost of diesel and kerosene, making the pump price changes to P2.13 per liter of diesel and P17.59 per liter of kerosene.
However, the fuel pump price adjustment remains at a total increase of P5.49 per liter.
“The drop in transportation costs, of course, was really affected by external factors,” said Mr. Maps. “It is good that although the rate of inflation is still high, for example, diesel in April was 122.7% but it decreased in May to 58.5%.
FOOD, OPERATING EXPENSES
Meanwhile, inflation in the weighted food and non-alcoholic beverages index stood at 5.7% in May, slower than the 6% seen in April.
However, rice prices continued to jump last month, bringing inflation to 15.6% or the fastest since 20.9% in July 2024.
Based on PSA data, the price of local milled rice increased by 17.52% to P50.91 per kilogram in the second half of May from P43.32 last year. The price of finely milled rice rose 15.55% year-on-year to P57.88 from P50.09 last year, while specialty rice rose 10.51% year-on-year to P65.69 per kilo from P59.44.
On the other hand, the inflation of housing, water, electricity, gas and others decreased to 7.8% in May, from 8.2% in April.
This was caused by a weak increase in the cost of liquefied petroleum gas (LPG), with inflation at 41% last month from 45.8% in April.
In May, domestic oil firms increased the price of LPG by 1.22 per kilogram (kg), bringing the average cost of an 11-kg cylinder between P1,070.42 and P1,701.77 in May. This, however, was softer than the increase of P17-P36.63 per kg imposed in April.
The National Government in April implemented a three-month moratorium on excise duty on kerosene and LPG.
“Lower global oil prices should help reduce LPG and liquid fuel costs, but tight supply amid the ongoing closure of the Strait of Hormuz may keep price levels relatively high,” Chinabank Research said in an emailed note on Friday.
Meanwhile, core inflation, which excludes volatile food and energy prices, bucked the headline print trend as it rose to 4.1% in May from 3.9% last month and 2.2% in May 2025.
This was the fastest pace seen since the 4.4% recorded in December 2023.
Despite the slight increase in inflation, Jonathan L. Ravelas, senior consultant at Reyes Tacandong & Co., said this points to the strengthening of existing pressures.
“That’s a very important sign. It means we should be worried, but not panic,” he said in a Viber message.
PSA also reported that inflation in the National Capital Region (NCR) decreased to 5% in May from 5.5% in April and 1.7% last year.
Excluding NCR, it fell to 7.1% from 7.7% last month and 1.2% last year.
Meanwhile, inflation for households in the bottom 30 percent of incomes fell to 8.4 percent from 8.5 percent in April and 0 percent last year.
This brought the average clip down from 30% to 5% over a five-month period.
However, Mr. PSA’s map noted that inflationary pressures persist amid a global energy crisis caused by the Middle East war since it began in late February.
“Therefore, the risk going forward would be the impact of external factors on fuel and energy supplies and our food prices,” he said.
NO HURRY TO GO
The case for more aggressive monetary policy tightening is less urgent now that May marks the start of inflation losing its grip, Mr. Ravelas.
“In terms of policy, this keeps the BSP on guard – there is no rush to tighten aggressively, but there is no quick pivot to reduce either,” he said.
However, Mr. Ravelas expects the central bank to raise the key policy rate for the second time in a row by 25 basis points (bps) at its meeting this month.
If it does, the average borrowing cost will rise to 4.75%.
“The practical takeaway is to remain stable: investors should remain selective, businesses should prepare for the long term but reduce cost pressures, and policymakers should avoid overreacting to short-term spikes,” he added.
In a Chinabank survey, inflation in the coming months will now remain below 7% to 5.7% for the rest of the year.
“Nevertheless, the lower-than-expected result supports our view that extra-cyclical rate hikes are unnecessary, allowing the BSP to continue with a gradual and shallow tightening path,” it added. “We continue to expect two 25-bp rate hikes in June and August.”
The central bank began its new tightening cycle in April, delivering its first 25-bp hike in two years that brought the key interest rate to 4.5%.
It has since indicated that it is open to expanding its monetary policy tools to bring inflation back to its 3% target and ensure that inflation expectations remain firm.
BSP Governor Eli M. Remolona, Jr. similarly he said last month that the Monetary Board was considering the off-cycle, but noted that it could also wait until its regular meeting on June 18 to examine the latest inflation report.
In 2026, the BSP projects inflation to end at 6.3%, before slowing to 4.3% in 2027.
