UMVA has learned that inflation rates have taken a surprising turn, with the latest figures revealing a slower-than-expected increase in May, largely due to a decrease in transport costs following a series of pump price reductions.
The inflation rate settled at 6.8% in May, marking a decrease from the 7.2% recorded in April, but still higher than the 1.3% seen in the same month last year. This unexpected shift has caught economic managers and the market off guard, as it defies earlier predictions of a higher inflation rate.
The May reading is the first time in six months that the inflation rate has cooled down month-on-month, and it's the slowest pace in two months, dating back to the 4.1% recorded in March. This development is significant, as it indicates a potential turning point in the inflation trend, which has been on the rise for some time.
Despite this slowdown, the inflation rate remains above the central bank's target range of 2%-4% for the third month in a row, bringing the year-to-date average inflation to 4.5%. However, a closer look at the data reveals that core inflation, which excludes volatile food and energy prices, has actually quickened to 4.1% in May, up from 3.9% the previous month.
According to information obtained by UMVA, this increase in core inflation is the fastest pace seen since December 2023, when it reached 4.4%. This suggests that underlying price pressures remain strong, even as the overall inflation rate slows down, posing a challenge for economic policymakers as they navigate the complex landscape of inflation and growth.
