The Philippine inflation rate showed signs of moderating in May as consumer price increases began to slow due to a drop in fuel prices in the global market.
According to data released by the country's statistical authority, annual inflation recorded 6.8% in May, lower than the 7.2% recorded in April.
The figure was also below analysts' expectations who had previously estimated inflation at around 7.8%.
The decline in the inflation rate was largely influenced by geopolitical developments that could reduce pressure on the world energy market.
Efforts to extend the ceasefire between the United States and Iran have raised hopes that the tension of the conflict in the Middle East region is easing.
This situation has helped stabilize global oil supplies and subsequently lowered crude oil prices, thus reducing fuel costs in many countries including the Philippines.
The impact of lower fuel prices is very important for the Philippines because the country is highly dependent on energy imports. More than 90% of the country's oil needs are imported from the Middle East.
As global oil prices fall, transportation, logistics and production costs also become lower. This helps reduce price pressures on various goods and services used by consumers.
The more moderate inflation development also provides some relief to the country's central bank, the Bangko Sentral ng Pilipinas.
Previously, the central bank had faced pressure to consider raising interest rates to curb still high inflation.
Its governor, Eli Remolona, said that the bank would review the latest inflation data before making a decision on the overnight policy rate at a meeting scheduled for June 18.
Although inflation rates are still relatively high compared to the central bank's long-term target, the May readings suggest that price pressures may be starting to subside.
If the downward trend in energy prices continues and geopolitical conditions remain stable, the Philippines could potentially see inflation continue to decline in the coming months.
However, monetary authorities are expected to remain cautious as any rebound in oil prices or global supply disruptions could cause inflationary pressures to rise again.
