Headline inflation slowed down to 2.4 percent year-on-year in August from 2.6 percent in the previous month, with lower inflation rates recorded for all commodity groups except clothing. The year-to-date average was maintained at 2.6 percent. Month-on-month, headline inflation rose by only 0.1 percent in August, lower than the 0.8 percent increase in July.
The lower inflation in August can be traced mainly to the lower prices of fruits and vegetables relative to levels a year ago, and the slower increase in fuel prices. Core inflation, a measure of price pressures that excludes certain food and energy items, decelerated to 2.9 percent in August from 3.0 percent in July.
The August inflation was significantly lower than the 6.3 percent inflation posted a year ago and within the 2.3-3.2 percent BSP forecast range for the month. Indicators continue to show limited inflation pressures for the rest of the year. The expansion in demand remains moderate and the relatively firm peso serves to temper price pressures in the near term.
However, risks to future inflation remain. Increases in transport costs, wage hike petitions, if granted, renewed volatility in world oil prices and stronger liquidity growth could generate higher risks to the inflation outlook. The BSP therefore continues to closely monitor these and other potential risks to future inflation to help ensure the sustainability of non-inflationary economic growth.