By Katherine K. Chan, Reporter
HEADLINE inflation came in slower than expected in May as pressures from transport costs eased following several pump price rollbacks during the month, the Philippine Statistics Authority (PSA) reported.
Inflation settled at 6.8% in May, easing from 7.2% in April but quickened from the 1.3% in the same month last year, according to PSA data.
This marked the first time in half a year or since November 2025 that the headline print cooled month on month, and was the slowest pace in two months or since the 4.1% in March.
The May reading also came as a surprise as a BusinessWorld poll of 16 economists conducted last week yielded a median estimate 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 the headline inflation has topped the central bank’s 2%-4% target, bringing the year-to-date average inflation past the goal at 4.5%.
The slower inflation rate last month came as the country saw slower price increases in fuel, food, and energy-related utilities, National Statistician Claire Dennis S. Mapa said.
“First is transport. We all know the pump prices change every week and our volatility is fairly high. But the overall average for May is lower than April,” he told a news briefing in mixed English and Filipino on Friday.
Transport inflation, which accounted for 70.3% of the slower overall inflation in May, eased to 16.2% during the month from 21.4% in April as diesel and gas prices increased at a slower pace.
Inflation for diesel eased sharply to 58.5% from 122.7% a month prior, while gasoline inflation slightly cooled to 51.6% from 59.6% in April.
In May, local fuel retailers cut the costs of diesel and kerosene, bringing total pump price adjustments to a net decrease of P2.13 per liter for diesel and P17.59 per liter for kerosene.
However, pump price adjustments for gasoline still stood at a net increase of P5.49 per liter.
“The drop in transport prices, of course, was really affected by external factors,” Mr. Mapa said. “It’s good that even while the inflation rate is still high, for example, diesel in April was at 122.7%, but it fell in May to 58.5%. So, together with gasoline, it contributed to a reduction in the inflation rate for transport.”
FOOD, UTILITY COSTS
Meanwhile, inflation for the heavily weighted food and nonalcoholic beverages index stood at 5.7% in May, slower than the 6% seen in April.
However, rice prices continued to jump last month, bringing its inflation to 15.6% or the fastest since the 20.9% in July 2024
Based on PSA data, the price of local regular milled rice rose by 17.52% to P50.91 per kilo in the second half of May from P43.32 a year ago. The price well-milled rice climbed by 15.55% year on year to P57.88 from P50.09 a year ago, while special rice was up 10.51% annually to P65.69 a kilo from P59.44.
On the other hand, inflation for housing, water, electricity, gas and other fuels slowed to 7.8% in May, from 8.2% in April.
This was driven by the weaker uptick in the cost of liquefied petroleum gas (LPG), which had an inflation of 41% last month from 45.8% in April.
In May, domestic oil firms raised the price of LPG by 1.22 per kilogram (kg), bringing the estimated cost of an 11-kg cylinder between P1,070.42 and P1,701.77 in May. This, however, was softer than the P17-P36.63 per kg increase imposed in April.
The National Government in April implemented a three-month temporary freeze on the excise tax on kerosene and LPG.
“Lower global oil prices should help temper LPG and liquid fuel costs, but tight supply amid the continued closure of the Strait of Hormuz may keep overall price levels relatively elevated,” Chinabank Research said in an e-mailed note on Friday.
Meanwhile, core inflation, which excludes volatile food and energy prices, bucked the headline print’s trajectory as it quickened to 4.1% in May from 3.9% a month ago and 2.2% in May 2025.
This was the fastest pace seen since the 4.4% recorded in December 2023.
Despite the marginal uptick in core inflation, Jonathan L. Ravelas, senior adviser at Reyes Tacandong & Co., said this points to stabilizing underlying pressures.
“That’s the more important signal. It means we should be concerned, but not alarmed,” he said in a Viber message.
The PSA also reported that inflation in the National Capital Region (NCR) slowed to 5% in May from 5.5% in April and 1.7% a year earlier.
Outside NCR, it eased to 7.1% from 7.7% the previous month and 1.2% last year.
Meanwhile, inflation for the bottom 30% of income households cooled to 8.4% from 8.5% in April and the 0% clip last year.
This brought the average clip for the bottom 30% to 5% in the five-month period.
However, PSA’s Mr. Mapa noted that inflationary pressures continue amid the global energy crisis caused by the Middle East war since it began in late February.
“So, the risk moving forward would really be the impact of external factors on fuel and energy commodities and on the prices of our food,” he said.
NO URGENCY FOR HIKES
The case for a more aggressive monetary policy tightening has become less urgent as May likely marked the start of inflation losing its momentum, Mr. Ravelas said.
“For policy, this keeps the BSP cautious — no urgency to tighten aggressively, but no quick pivot to easing either,” he said.
Still, Mr. Ravelas expects the central bank to raise the key policy rate for a second straight time by 25 basis points (bps) at its meeting this month.
If realized, the benchmark borrowing cost will climb to 4.75%.
“The practical takeaway is stay disciplined: investors should remain selective, businesses should prepare for lingering but easing cost pressures, and policymakers should avoid overreacting to short-term spikes,” he added.
For Chinabank Research, inflation in the months ahead will now likely stay below 7% to average 5.7% for the entire year.
“Nonetheless, the lower-than-expected outturn supports our view that off-cycle rate hikes are unnecessary, allowing the BSP to proceed with a gradual and shallow tightening path,” it added. “We continue to expect two additional 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 over two years which brought the key interest rate to 4.5%.
It has since signaled that it is open to maximizing its monetary policy tools to steer inflation back to its 3% target and ensure that inflation expectations remain anchored.
BSP Governor Eli M. Remolona, Jr. likewise said last month that the Monetary Board is considering an off-cycle move, but noted that they may also wait until their regular meeting on June 18 to assess the latest inflation report.
For 2026, the BSP projects inflation to end at 6.3%, before easing to 4.3% in 2027.
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