December inflation hits 8-month high of 4.4%

MANILA, Philippines – The nationwide inflation rate rose to an eight-month high of 4.4 percent in December due to higher oil and food prices, the National Statistics Office (NSO) reported yesterday.

The NSO said that inflation accelerated to 4.4 percent in December last year from 2.8 percent in November. Inflation steadily dropped to a 20-year low of 0.1 percent in August before climbing for the fourth straight month to its fastest level since April 2009 when inflation averaged at 4.8 percent.

December’s inflation rate was still within the central bank’s forecast of between 3.7 percent and 4.6 percent for the month.

The average inflation rate for all of 2009 came to 3.2 percent, down sharply from 9.3 percent in 2008.

BSP Governor Amando M. Tetangco Jr. told participants of the Tuesday Club breakfast meeting at Edsa Shangri-la Hotel yesterday that the average inflation last year was below the midpoint of the 2.5 percent to 4.5 percent target set by monetary authorities.

“Inflation last year was even below the midpoint of 3.5 percent,” Tetangco stressed. The BSP expected inflation to average 3.3 percent last year despite the impact of tropical storm Ondoy and typhoon Pepeng.

Although higher than the figure in November, he explained that the average inflation in December was within the 3.7 percent to 4.6 percent forecast set by the central bank.

Data from NSO showed that annual inflation for food, beverage, and tobacco climbed to 5.2 percent in December from 4.8 percent in November. Annual average inflation rate for food, beverage and tobacco eased to 5.8 percent in 2009 from 12.9 percent in 2008.

Annual inflation rate for food alone at the national level rose to 5.3 percent in December from 4.9 percent in November. However, annual average inflation for food alone slowed down to six percent in 2009 from 13.6 percent in 2008 when the price of rice in the world market skyrocketed due to the shortage.

Annual inflation for clothing, housing and repairs as well as miscellaneous items however eased to 2.5 percent from 4.2 percent while the index of fuel, light, and water as well as services were negative at 2.6 percent and 0.2 percent.

He pointed out that the central bank has set an inflation target of 3.5 percent to 5.5 percent in 2010 and three percent to five percent in 2011 under its inflation targeting model for monetary policy.

“These bode well and enhance our confidence that our expected within target inflation trajectory for both 2010 and 2011 will materialize,” he said.

According to him, inflation would likely average close to four percent this year helping monetary authorities adopt a policy stance supportive of economic growth.

“This favorable inflation allows us to adopt a monetary stance supportive of economic growth. This subdued inflation will provide policy space,” Tetangco added.

In November of 2008, the BSP adopted a series of liquidity enhancing measures to free up liquidity in the system and help the Philippines survive the global financial crisis. –Lawrence Agcaoili (The Philippine Star)