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Inflation Rate Dropped in November


“The lower-than-expected inflation rate for November is a very welcome development that confirms the strength of the country’s fundamentals and is expected to improve business confidence. At 3.9 percent, the November inflation rate is much lower than the October inflation rate of 5.4 percent and the national government’s revised inflation target of 5.0 percent for November.  This brings the average inflation rate for the first eleven months to 6.9 percent, now lower than the 7.0 percent full-year target for 1999.”

 “The decline in the November inflation rate was on account of a significant slowdown in the price growth of food, beverages, and tobacco (FBT) to 0.1 percent from 2.8 percent in October. Food inflation alone declined by 0.1percent in November against the increase of 2.7 percent in October. The inflation rate of all food items except corn declined in November compared to their previous month’s levels due mainly to favorable weather conditions.”

“Likewise, all non-food items registered lower inflation rates except housing and repairs which retained its previous month’s rate of 8.8 percent, and services which increased to 12.1 percent from 11.6 percent the previous month. The average inflation for clothing fell to 4.8 percent from 4.9 percent; fuel, light and water to 8.2 percent from 8.6 percent; and miscellaneous items to 3.6 percent from 3.9 percent.”

 “Similarly, we note that the month-on-month inflation rate dropped to 0.2 percent in November from 0.3 percent in October. The month-on-month inflation rate of all items declined, except for miscellaneous items which increased slightly to 0.3 percent in November from 0.2 percent in October.”

“The inflation rate in November is much lower than the BSP’s inflation objective, and hence, provides the monetary authorities additional room for greater flexibility in monetary policy.   The significant decline in the inflation rate from 11.5 percent in January to its current level is partly on account of prudent monetary management for the past year as the BSP maintained significant margins under the monthly program ceilings of base money and reserve money. This, in turn, prevented demand pressures from feeding into inflation.”   

“This notwithstanding, the monetary authorities feel that the current monetary policy stance is consistent with its inflation objective in the medium term and the maintenance of overall macroeconomic stability. A further easing of monetary policy at this time may not be warranted given the potential threats posed by recent developments in the fiscal front and the renewed activity in the foreign exchange market.”

 “We expect the inflation rate in December to be within program levels.  Hence, the inflation target for 1999 remains very much achievable.  The inflation rate for 2000 is expected to be lower, ranging from 6.0-7.0 percent.”

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