MANILA -- (UPDATE) Inflation picked up in May but held within the Bangko Sentral ng Pilipinas' target range for the fourth straight month, official data released on Wednesday showed.
The Consumer Price Index rose 3.2 percent in May from 3 percent in April, breaking 6 consecutive months of slowdown. The central bank's research arm predicted a 2.8 to 3.6 percent range.
The 3.4-percent increase in food and non-alcoholic beverages and the 3.3-percent uptick in water, electricity, gas and other fuels contributed to the faster headline rate in May, said National Statistician Claire Dennis Mapa.
Farm damage due to a weak El Nino caused an uptick in food prices, said Socioeconomic Planning Secretary Ernesto Pernia.
"El Niño is a recurring problem that requires an immediate and long-term response. The country needs to have a more robust solution to mitigate the impacts of extreme weather conditions and climate change considering that the Philippines is prone to natural disasters," he said.
Slowing inflation gives the BSP room to roll back the 175-basis point increase in the overnight borrowing rate last year., according to analysts. It cut the benchmark by 25 points last May.
"At the end of the day, it still falls within the BSP's expected range," ATR Asset Management head of equities Julian Tarrobago told ANC's Market Edge.
Tarrobago said he was keeping his forecasts of another reduction in the benchmark rate and a 100-point cut in the reserve requirement ratio for banks within the year.
The uptick is "not really worrying" and inflation remains "subdued" with monetary authorities still poised to loosen policy, said Standard Chartered Asia economist Chidu Narayanan.
"We think the central bank will be supportive of growth," he told Market Edge, citing disappointing first quarter gross domestic product growth.