RTTNews - The Philippine consumer prices rose at the slowest pace in about 18 months in May, mainly due to smaller price rises in food and miscellaneous goods groups, an official report showed Friday.

Data released by the country's National Statistics Office revealed that consumer prices rose 3.3% year-on-year in May, much slower than a 4.8% increase in the preceding month. Economists were expecting a price rise of 3.7%. A year earlier, consumer prices were up 9.5%.

Excluding selected food and energy items, the core inflation eased to 4.4% in May from 5% in April.

The annual inflation rate in the National Capital Region slowed to 0.8% from 2.2% in April, while inflation in the Areas Outside the National Capital Region eased to 4.2% from 5.8%.

Month-on-month, consumer prices in the whole of the country unexpectedly declined 0.1% in May, following a 0.5% rise in April. Economists expected a 0.5% rise in prices.

Data released earlier in the week have shown some signs that the economy is heading for a recession. According to the National Statistical Coordination Board, the seasonally adjusted GDP dropped 2.3% sequentially in the first quarter, the lowest in 20 years. This followed a 1% rise in the fourth quarter. Two consecutive quarters of decline in GDP indicates a technical recession.

In order to lift the economy from the slowdown, the central bank in its latest monetary policy meeting reduced its key interest rate, the overnight borrowing or reverse repurchase rate, to 4.25% from 4.5%, which is the lowest level since May 1992. At the same time, the bank lowered overnight lending rate or repurchase rate to 6.25% from 6.50%. The latest rate cuts takes the cumulative reduction in the key interest rates to 175 basis points since December last year.

The central bank pointed out that although there were signs that the global slowdown was bottoming out, it was too early to conclude that global conditions were clearly moving towards normalcy. Moreover, the central bank said it was prepared to move quickly in order to address the potential risks to price stability, while continuing to support domestic activity consistent with a non-inflationary path.

Commenting on the latest inflation data, central bank governor Amando Tetangco said in a statement that the favorable inflation trend observed so far this year provides the central bank with some margin of flexibility in monetary policy management. Against the backdrop of an economic slowdown, the central bank will continue to focus on keeping prices stable while providing support to domestic output growth, he added.

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