Bank of the Philippine Islands (BPI) expects a slightly better inflation rate for the full year at 3.5 percent from 3.7 percent, following a lower-than-expected food inflation in April.

In a statement released Wednesday, BPI chief economist Jun Neri said the new forecast reflects the stabilizing prices of food and utilities.

"The latest turnout was more contained than anticipated as the month-on-month figure revealed overall prices have actually declined 0.1 percent," he said.

April inflation inched up to 3.8 percent from 3.7 percent in March, according to the Philippine Statistics Authority.

BPI shared that rice prices in April rose by only 0.3 percent.

"Harvest season has reportedly peaked during the period, while importation may have provided some relief as well amid declining global rice prices," Neri said.

Meanwhile, prices of most commodities further declined to 3.2 percent from 3.4 percent, which the bank said helped prevent inflation from spiking.

Impact of El Niño

However, Neri said overall inflation might still exceed four percent between May and July due to the "lasting" impact of El Niño, along with possibly weaker peso and higher global oil prices.

He said food supply measures are critical as food prices account for 2.3 to 3.8 percent of overall inflation.

In terms of fuel prices, Neri said these could reach $90 per barrel if the geopolitical tensions in the Middle East worsen.

"However, the breach in the inflation target may be temporary and may be more benign than originally expected, with inflation likely to ease in the second half of the year," he said.

Neri said the Bangko Sentral ng Pilipinas might consider lowering its 6.5 percent policy rate in the third or fourth quarter of the year to bring inflation close to the low end of its 2 to 4 percent inflation target.