“Year-on-year inflation in December 2000 was registered at 6.6 percent, higher than the November inflation rate of 6.0 percent. The December inflation rate was consistent with the BSP’s internal forecast range of 6.5-6.6 percent for the month. The December inflation brings the average inflation rate for 2000 to 4.4 percent, well below the Government’s inflation target range of 5.0-6.0 percent for the year.”
“The uptick in December inflation was supply-driven, attributed mainly to higher year-on-year inflation rates for fuel, light and water (FLW) and services as well as food, beverages and tobacco (FBT). The inflation rate for FLW increased to 12.5 percent in December from 10.8 percent in November, while that for services picked up to 13.4 percent from 12.8 percent. Similarly, the year-on-year inflation rate for FBT rose to 5.1 percent in December from 4.6 percent in the previous month.
“However, on a month-on-month basis, the inflation rate decelerated to 0.7 percent >in December from 1.2 percent in the preceding month. Month-on-month FBT inflation likewise slowed down to 0.5 percent following a 1.4 percent increase in November.”
“The pass-through impact of the peso depreciation, the series of oil price hikes and the wage adjustments in the latter part of 2000 are expected to continue to exert significant pressure on inflation in the early part of the year. However, evidence points to an abatement of cost pressures in the second half, which could temper the increase in prices. Recent data indicate a marked softening of international crude prices, and this trend is expected to continue for the rest of the year. In addition, food prices are expected to provide a stabilizing influence on overall inflation in 2001, given the good agricultural performance and timely importation of basic items.
These developments could provide further scope for a gradual yet cautious easing of the monetary policy stance. Monetary authorities will continue to monitor closely all relevant economic indicators for signs of any possible build-up in inflationary pressures.