Metro Manila (CNN Philippines, May 7) — Inflation further dropped to three percent in April, the lowest in over a year amid stable food prices.

This is slower than the 3.3 percent pace in March and the 4.5 percent logged in April 2018, which is also the slowest pace since December 2017.

The pace is also below the 3.1 percent median forecast among analysts in a CNN Philippines poll.

"The slowdown was mainly brought about by the slower annual increase in the heavily-weighted food and non-alcoholic beverages index at 3.0 percent," the Philippine Statistics Authority (PSA) said.

Inflation measures the pace of price increases among basic goods like food, utilities, and transport.

The price of food and non-alcoholic drinks eased from the 3.4 percent clip tallied in March, the PSA said. Rice prices also stabilized from a year ago, moving by just 0.02 percent.

Meanwhile, the costs of housing, water, electricity, gas, and other fuels; and furnishing, household equipment and routine maintenance of the house both slowed to 3.2 percent versus March's 3.4 percent.

Average inflation for the first four months has eased to 3.6 percent, well within the 2-4 percent target range of the Bangko Sentral ng Pilipinas (BSP).

On the other hand, transport costs picked up faster at 3.8 percent from 3.3 percent the prior month, just as crude prices continued to rise in April.

Based on location, Metro Manila posted a 3.1 percent inflation rate while other provinces posted a three percent increase.

Twelve regions saw slower annual inflation rates in April, with Central Visayas logging the lowest at just 1.3 percent. The Mimaropa region experienced the fastest price increases at 4.6 percent.

The National Economic and Development Authority attributed the sustained drop in inflation to stable rice supply. Secretary Ernesto Pernia said the passage of the rice tariffication law should sustain the supply of cheap rice from abroad.

However, the Cabinet official flagged the need to be watchful due to the ongoing dry spell, a possible increase in utility rates, and volatile world crude prices which may cause price pressures.

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More analysts now expect a policy response from the BSP given the inflation downtrend, with the average now well within target.

Only four out of 14 analysts surveyed by CNN Philippines expect the Monetary Board to stay on hold on interest rates and reserve requirement ratio (RRR) during Thursday's policy meeting. Seven see a rate cut of at least 25 basis points, while six expect a reduction for the RRR. Three are betting that the rate and reserve cuts will be done in one go.

"Slowing inflation sets the stage for the BSP to begin monetary loosening," said HSBC economist Noelan Arbis, noting that the BSP may now put "greater emphasis" on assisting economic growth.

The key interest rate of 4.75% is at a decade high, following a series of policy hikes in 2018 meant to combat surging consumer prices. The 18 percent reserve standard remains among the highest in the world, raising the cost of borrowing.

The BSP sees 2019 inflation at three percent, down from last year's 5.2 percent.

BSP Governor Benjamin Diokno has said that he is seeing room for a rate cut, but timing is the big question.

In a statement, Diokno said the latest inflation figure is on track with the BSP's expectation that inflation will be within target this year. He noted, however, that authorities need to "keep a close watch over price developments" given risks to the outlook. He added that the latest data will be considered during this week's rate-setting meeting.