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Inflation Rate Slows Down to 6.7 Percent in February

03.05.2001

“Year-on-year inflation in February 2001 decelerated to 6.7 percent from 6.9 percent in January due to the slowdown in food prices during the month. The February inflation brings the average inflation rate for the first two months of the year to 6.8 percent, within the government’s target of 6.0-7.0 percent for the whole year of 2001.”

“The inflation rate for the food, beverage and tobacco (FBT) commodity group—which accounts for 55.1 percent of the CPI basket— rose by 4.3 percent during the month reflecting a decline from the 5.2 percent year-on-year inflation registered in the previous month. Meanwhile, price increases in the other commodity groups accelerated.”

“On a month-on-month basis, the inflation rate decelerated to 0.2 percent from 0.8 percent in the preceding month. Month-on-month FBT inflation declined by 0.5 percent, a reversal of the 0.9 percent uptick in January. By contrast, higher month-on-month inflation rates were observed for all other commodities, with the biggest increase recorded for fuel, light and water (FLW), which rose by 1.7 percent from 0.4 percent in January. Similarly, February inflation rates for housing and repairs went up by 1.2 percent; services, 0.9 percent; miscellaneous items, 0.5 percent; and clothing, 0.3 percent from their respective levels in the previous month.”

“Easing supply-side pressures due to strong agricultural production in 2000 and a likely milder-than-expected el niño weather phenomenon in 2001are expected to have a stabilizing influence on the general price movements for the whole of 2001. In particular, recent indicators reinforce earlier forecasts of easing inflationary pressures in the latter half of the year. This is based on expectations of softening world oil prices and continued stability in the foreign exchange market. While these would give monetary policy added flexibility, a possible upsurge in price pressures could emanate from certain underlying risks such as the threat of supply cuts by the major oil producing countries. Thus, monetary policy will continue to maintain a close watch against any rekindling of inflationary pressures, as it also monitors developments in the rest of the economy.”

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