“Year-on-year inflation in January 2001 was registered at 6.9 percent, up slightly from the December inflation rate of 6.6 percent. The December inflation rate was within the BSP’s internal forecast range of 6.7-7.0 percent for the month.”
“The higher January inflation rate was due mainly to higher year-on-year inflation rates for food, beverage and tobacco (FBT) as well as services. The inflation rate for FBT rose slightly to 5.2 percent in January from 5.1 percent in December, while that for services picked up to 13.6 percent from 13.5 percent.”
“On a month-on-month basis, the inflation rate rose slightly to 0.8 percent from 0.7 percent in the preceding month. Month-on-month FBT inflation increased to 0.9 percent following a 0.5 percent increase in December. However, slower month-on-month inflation rates were observed for fuel, light and water (FLW) (from 1.8 percent to 0.4 percent) and services (from 1.0 percent to 0.4 percent).”
“Current price pressures stemmed mainly from supply-side factors, particularly for food products. We note, for example, that the January uptick in food prices came mainly from temporary supply disturbances in fish and meat products. Meanwhile, lower inflation rates were recorded for major food items such as rice, corn and fruits as well as vegetables during the same period. These major food items are expected to provide a stabilizing influence on the general price level in 2001 as a result of strong agricultural output performance in 2000. Available evidence also suggests diminishing cost pressures in the latter half of the year, based on expectations of softening international crude oil prices, a more stable exchange rate, and lower interest rates. Moreover, the underlying trend of price increases has not strengthened considerably so far due to the presence of spare productive capacity. This notwithstanding, it is important for monetary policy to react at an early stage to emerging inflationary pressures. For this reason, the Bangko Sentral will continue to pay close attention to possible upside risks in the overall inflation picture.