BSP Governor Gabriel C. Singson today noted that with the December inflation rate of 10.5 percent, the whole year inflation average for 1998 remained single-digit at 9.0 percent. This was below the lower end of target of 9.25-9.75 percent (1988=100) under the country’s economic and financial program for 1998.
Singson observed that the December inflation slowed down from the November inflation of 10.8 percent. In terms of the 1994 base year, inflation also Decelerated from 11.2 percent to 10.4 percent. The BSP chief indicated that the key element in the December developments was the slowdown in prices of all commodity groups including food, notwithstanding the increased spending during the holidays.
"This simply shows that the high inflation we experienced in the past few months of 1998 was indeed a once-off phenomenon brought about by the weather shock in October. The BSP was right in not tightening its monetary policy stance to respond to this supply-driven phenomenon."
Singson was referring to the fact that based on the movement of domestic liquidity for November, M3 continued to show positive growth of more than 7 percent on an annual basis. On a month-on-month basis, M3 grew by 2.1 percent, the highest so far during the year.
This means, the BSP chief stressed, inflation is on the way down. With better weather conditions expected in 1999, Singson pointed out that the inflation performance in 1999 would even be more favorable. This would be a positive factor for interest rate prospects. "We can expect further stabilization in domestic interest rates," Singson said.
Monetary policy, Singson announced, will continue to focus on the moderation of inflation and the stabilization of the foreign exchange market, both of which are expected to further enhance the economy’s growth prospects. Moreover, with more stable interest rates and in the light of more flexible fiscal policy in 1999, the growth target of 3.5 percent is achievable.