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Inflation for the First Nine Months Remains Subdued


Year-on-year inflation in September remained steady at its August level of 4.6 percent.  This brings the average inflation rate for the first nine months of the year to 3.8 percent, well below the Government’s inflation target range of 5.0-6.0 percent for 2000 and the IMF program level of 6.4 percent in September. It is encouraging to note that the September actual inflation rate  was  within the BSP’s internal inflation forecast range of 4.6-4.8 percent  for the same month.

The moderate inflation rate for September was due mainly to the deceleration in the year-on-year inflation rates of food, beverage and tobacco  (FBT), fuel, light and water (FLW), services and miscellaneous items.  These dampened the uptick in the inflation rates for housing and repairs (H&R) and clothing.  The steady inflation rate suggests that the underlying trend of price increases has not strengthened so far despite the higher oil prices.

In particular, the year-on-year inflation rates of FBT dropped to 2.6 percent in September from 2.7 percent in August; FLW to 10.4 percent from 11.8 percent; services to 11.5 percent from 11.6 percent; and miscellaneous items to 2.5 percent from 2.6 percent. By contrast, the inflation rates for housing and repairs (H&R) rose to 4.2 percent in September from 3.9 percent in August, and clothing to 2.4 percent from 2.3 percent.

Meanwhile, the month-on-month increase in inflation was only 0.5 percent in September, lower than the 0.7 percent  month-on-month rise in August. In particular, inflation in all major commodity groups, except H&R and clothing, posted lower inflation rates during the month.

Thus far, the price increases have been mild.  However, supply shocks such as higher oil prices, and wage and transport fare adjustments could exert inflationary pressures in the months ahead.  At the same time, most leading demand indicators show an economy that is firmly on the path to recovery.  The BSP will, therefore, continue to ensure that the liquidity requirements of a growing economy are provided for while vigilantly monitoring all relevant economic indicators that may suggest heightened inflationary pressures.

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