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Inflation Rate Moves Up to 6.7 Percent in June but BSP Confident that Target Range for the Year can be Attained


“The year-on-year inflation rate for June of 6.7 percent was slightly higher compared to the rate a month ago but this was largely in line with market expectations. Actual inflation remains consistent with the projected path for 2001, which indicates a rising trend through the middle of the year before tapering off towards the fourth quarter. With a year-to-date inflation rate of 6.7 percent, the BSP continues to expect a stable inflation outlook for the remainder of 2001 and is confident that the 6.0-7.0 percent inflation target for the year will be achieved.”

“Recent increases in the general price level have been driven mostly by cost-push or supply-side factors, such as the increase in prices of food, particularly fish, meat and dairy products and of domestic oil products rather than by generalized demand-driven inflationary pressures. The June 2001 uptick in inflation, for example, can be traced mainly to the price movements in the food, beverage and tobacco (FBT) commodity group as well as in the fuel, light and water (FLW) category. Experience indicates that cost-push influences on prices tend to be temporary in nature. In addition, seasonal factors related to the opening of school in June pushed up prices of school supplies and related educational services during the month.”

“In addition, there are mitigating factors in the inflation outlook. The continuing stability in prices of major food items, particularly rice, is expected to cushion the impact of the recent oil price increases on the general price level.”

“Nevertheless, a forward-looking approach to monetary policy requires close attention to developments in the overall economy to ensure a timely response to emerging inflationary risks. Monetary authorities thus will continue to be mindful of potential risks to the inflation outlook, particularly the impact on inflationary expectations of recent movements in domestic oil prices and in the foreign exchange rate.”

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