Inflation remains at 3% in December

MANILA, Philippines – The country’s inflation rate was steady at three percent in December, bringing the average inflation for 2010 to 3.8 percent or closer to the lower end of the 3.5-percent to 5.5-percent target set by the Bangko Sentral ng Pilipinas (BSP), the National Statistics Office (NSO) reported yesterday.

BSP Governor Amando M. Tetangco Jr. said the December inflation rate of three percent was also within the BSP’s forecast of 2.5 percent to 3.4 percent.

“This brings the 2010 full-year inflation average to 3.8 percent, well within the National Government’s target range of 3.5 percent to 5.5 percent,” Tetangco stressed.

Last year’s average inflation was higher than the 3.2-percent average inflation recorded in 2009 while the three percent inflation in December was way below the revised 4.3- percent inflation booked in December 2009.

The government said inflation in the National Capital Region (NCR) eased to 3.4 percent in December from 3.6 percent in November due to the decline in inflation for fuel, light and water (FLW) as well as services index. This brought the annual inflation in NCR to four percent from 2.4 percent.

On the other hand, inflation in areas outside NCR was steady at 2.8 percent last month bringing the average annual inflation to 3.7 percent last year from 3.9 percent in 2009.

Inflation for the FLW group eased to 11.5 percent in December from 12 percent in November followed by the services index that slowed down to 3.5 percent from 3.8 percent and the miscellaneous items that eased to 1.1 percent from 1.2 percent. The average price increases for the food, beverage, and tobacco (FBT) index increased to two percent from 1.9 percent while the clothing index went up to 1.9 percent from 1.7 percent.

Tetangco said inflation pressures last month were traced mainly to higher prices in fruits and vegetables and miscellaneous food items due to increased demand during the holiday season.

The BSP chief added that the increase in the prices of certain food items were offset by the decline in the cost of power supply from the Wholesale Electricity Spot Market (WESM) as well as the lower inflation rate for transportation and communication services.

“I understand that higher annual rates of increases in prices of food, beverage, and tobacco were offset by slower annual growth registered in the fuel, light, and water,” Tetangco said.

He pointed out that the country’s inflation outlook remains benign as monetary authorities expect inflation to average 3.6 percent this year and three percent next year or well within the target of three percent to five percent for 2011 to 2014.

“The inflation turnout in December supports our assessments of a manageable inflation outlook over the policy horizon, of course, barring adverse price surprises,” Tetangco said.

The BSP has kept interest rates at record lows for 13 straight policy setting meetings. The body slashed its key policy rates by 200 basis points between December 2008 and July 2009 to cushion the impact of the global financial crisis on the domestic economy.

The overnight borrowing rate is currently pegged at a record low of four percent and the overnight lending rate is at six percent.

“We will therefore closely monitor global and domestic developments, particularly policy actions in major economies, changes in global growth patterns and shifts in investor sentiment, among others, to see if there is a need to make adjustments to our current policy stance,” the BSP chief added. –Lawrence Agcaoili (The Philippine Star)