December inflation fell to 11-month low of 4.2%

Inflation rate in December decelerated to an 11-month low of 4.2 percent from 4.8 percent in November as increases in food prices and utility rates slowed, the National Statistics Office said Thursday.

The December inflation rate rose to 4 percent using 2000 as the base year, down from 4.7 percent in November.

The latest data brought the average inflation in 2011 at 4.8 percent using the 2006 base year, and 4.4 percent with 2000 as base year, both within the Bangko Sentral’s target of 3 to 5 percent. The Bangko Sentral, which uses an inflation targeting model to set monetary policy, had forecast the December inflation at between 4 percent and 4.9 percent, using the 2000 base. The central bank will switch to the 2006 base this year.

“This adds to our confidence regarding our assessment that inflation remains manageable over the policy horizon,” said Bangko Sentral Governor Amando Tetangco Jr. in a text message to reporters.

“We continue to be mindful of global developments, particularly geopolitical disturbances in the Middle East that may negatively impact on the current sanguine outlook. BSP will make adjustments to as necessary to ensure that our monetary policy settings are appropriate,” he said.

The NSO said nearly all commodity groups posted slower annual price increases or negative growth during the month.

The average annual headline inflation rate at the national level in 2011 was higher at 4.8 percent compared with 3.8 percent in 2010.

“There may be some form of easing at this month’s policy meeting, either through interest rates or banks’ reserve requirement,” Arthur Michael de Castro, an analyst at Bank of the Philippine Islands said before the report. “We’re seeing stable prices this year which may even be lower if the global slowdown worsens.”

The index in the National Capital Region followed the same trend as inflation further slowed down to 3 percent in December from 3.5 percent in November.

Inflation outside the capital region eased to 4.5 percent in December from 5.1 percent in November. The NSO attributed downtrend to the slower annual gains in food, beverages and tobacco, clothing and footwear and housing, water, electricity, gas and other fuels.

Consumer prices dropped 0.2 percent in December from an increase of 0.4 percent in November due to price cuts in heavily weighted food items such as rice, cooking oil, vegetables and sugar. –Elaine R. Alanguilan with Bloomberg