The Bangko Sentral ng Pilipinas (BSP) expects inflation this month to settle within 3.4 to 4.2 percent.

The maximum forecast is a bit higher than the upper end of the BSP’s target of 2 to 4 percent. It is also closer to last month’s 3.9 percent inflation announced by the Philippine Statistics Authority.

In its statement on Friday, the BSP said growth factors include relatively high prices of rice, vegetables, meat, fish and fuels. It added peso depreciation as another inflationary risk.

However, the central bank said inflation growth might be tempered by lower prices of electricity and fruits.

Higher than expected

BSP Governor Eli Remolona Jr. had said that overall inflation might exceed the central bank’s target until July also due to positive base effects, which is a statistical principle.

Union Bank of the Philippines chief economist Ruben Carlo Asuncion said growth in non-food prices could become more notable in June and the rest of the year.

“We reckon it is the turn of non-food elements that could supply upside surprises and restrain disinflation from accelerating,” he said.

Specifically, Asuncion projects housing and utility prices to reach 1.7 percent, before possibly hitting over 3 percent from August to September.

“Broad food prices are likely to end the year with lean inflation in the 2.4 to 3 percent range as supply shocks dissipate,” he said.

Statistics showed annual growth in rice prices slightly declined to 23 percent in May from 23.9 percent in the previous month.

Economists expect rice production to increase due to more rainfall in the second half of the year.

“Provided there are no large storms that tend to increase food prices, inflation could still be well within the BSP inflation target in 2024,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

Housing, utility prices moderate

Meanwhile, annual growth in the prices of housing, water, electricity, gas and other fuels rose to 0.9 percent in May from 0.4 percent in April.

Asuncion also sees prices at restaurants and of other miscellaneous goods and services to grow from 5.3 percent to 5.7 to 5.8 percent towards the year-end.

Due to possibly high inflation in the third quarter, Asuncion expects the BSP to ease its policy rate in the fourth quarter.