MANILA (AFP) - Inflation slowed to a 6.9 percent year-on-year rate in May from 7.1 percent in April due to slower increases in food and utility costs, the National Statistics Office said Tuesday.
The figure was at the lower end of the central bank's forecast range of 6.8-7.5 percent for the month and lower than the National Economic Development Authority's estimate of 7.0-7.3 percent.
The May figure brought inflation for the first five months of the year to 7.2 percent compared to 8.5 percent over the same period in 2005.
Core inflation, which excludes selected food and other volatile energy items, also slowed to 6.1 percent in May from 6.3 percent in April, the statistics office said.
All commodity groups posted lower price increases except for clothing and services.
Central Bank of the Philippines governor Amando Tetangco said the lower inflation rate gave monetary authorities more leeway to keep key interest rates unchanged.
"Last month's inflation rate provides some basis for keeping the present policy stance at this time while keeping an eye on domestic liquidity conditions and foreign interest rate movements," he said in a statement.
"Supply shocks are still dominant (but) price pressures from these should generally not be long-lasting," Tetangco said.
Last week the central bank kept its key interest rates unchanged for the eighth straight month on expectations that inflationary pressures would continue to ease in the second half of the year.
Rising interest rates, required to keep inflation in check, increase debt as well as the cost of doing business, which tends to pull down economic growth.
Government economic planners forecast 2006 inflation at 7.3-7.9 percent.
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