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Inflation Remains Relatively Subdued in October


Year-on-year inflation in October was 4.9 percent compared to 4.6 percent in the previous month. This brings the average inflation rate for the first ten months of the year to 3.9 percent, well below the government’s inflation target range of 5.0-6.0 percent for 2000. The October actual inflation rate was within the BSP’s internal inflation forecast range of 4.3 percent-5.0 percent for the same month.  

The rise in the inflation rate in October was due mainly to the increase in the year-on-year inflation rates of food, beverage and tobacco (FBT), clothing, services, housing and repairs (H&R) and miscellaneous items. The combined 2.0 percentage points increase in the  annual inflation rates for these sectors  more than offset the 1.2 percentage points decline  registered  for fuel, light and water (FLW). 

In particular, the year-on-year inflation rates of FBT rose to 2.9 percent in October from 2.6 percent in September; clothing to 2.7 percent from 2.4 percent; H&R to 4.7 percent from 4.2 percent; services to 11.9 percent from 11.5 percent; and miscellaneous items to 3.0 percent from 2.5 percent. By contrast, the inflation rate for FLW dropped to 9.2 percent in October from 10.4 percent in September. 

Meanwhile, the month-on-month increase in inflation was 0.7 percent in October, higher than the 0.5 percent month-on-month rise in September. In particular, inflation in all major commodity groups, except FBT, posted higher inflation rates during the month.

So far, price increases in October have remained moderate. However, further price adjustments in oil and transport fares  in the ensuing months could exert inflationary pressures.  The monetary authorities will monitor closely price developments to keep inflationary pressures at bay while remaining supportive of economic growth. It should be noted that leading demand indicators continue to show an economy that is on the path to recovery. Monetary policy stance will be adjusted to ensure that price stability will be sustained while economic recovery continues to gather steam.  

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