MANILA (June 6): Philippine annual inflation slowed for a fourth consecutive month in May, government data showed on Tuesday, to the lowest level in 12 months as food prices continued to ease, giving the central bank room to keep benchmark interest rates steady.

The consumer price index rose 6.1% in May from a year earlier, the slowest pace since the 5.4% rate seen in the same month last year, with declining transport costs also adding to the slowdown, the statistics agency said.

The headline figure came in just below the 6.2% median forecast in a Reuters poll and slower than the 6.6% rate in April.

The Bangko Sentral ng Pilipinas (BSP) had projected that May inflation would be within the 5.8%-6.6% range.

Core inflation, which strips out volatile food and fuel items, slowed to a four-month low of 7.7%, from April's 7.9%.

Headline inflation in the first five months of 2023 averaged 7.5%, still well above the BSP's 2%-4% target range for the year, but the government and the central bank have repeatedly said it would ease to within target range later in the year.

"The balance of risks to the inflation outlook for 2023 and 2024 remains tilted to the upside", the BSP said on Tuesday, citing constraints in the supply of key food items and the potential impact of the El Niño weather pattern on food prices and utility rates.

"The BSP stands ready to adjust the monetary policy stance as necessary to prevent the further broadening of price pressures, as well as the emergence of additional second order effects," it said in a statement.

The BSP kept its key interest rate steady on May 18, halting its policy tightening after a series of hikes and signalling a continued pause for the next two- to three meetings.

"Moderating inflation leaves [the] door open for the BSP to pause at the June meeting," said Nicholas Mapa, senior economist at ING.

The BSP's next policy meeting is on June 22.