Headline inflation edged down slightly in January to 4.3 percent year-on-year from 4.4 percent in December 2009. It was marginally below the BSP’s forecast for the month of 4.5-5.4 percent and sharply lower than the January 2009 headline inflation of 7.1 percent. Core inflation, which excludes specific food and energy items to measure generalized price pressures, was likewise lower at 3.0 percent year-on-year in January compared to 3.2 percent in December. There was also a slowdown in month-on-month headline inflation from 0.6 percent to 0.2 percent.
The slight deceleration in headline inflation was driven by the slower price increases of all major food groups and, to a lesser extent, by lower inflation for housing and repairs (H&R) and miscellaneous items. Inflation for food, which accounts for nearly half of the CPI basket, slowed down to 4.5 percent year-on-year from 5.3 percent previously. Fruits and vegetables registered the sharpest drop in year-on-year inflation to 7.2 percent in January 2010 from 11.8 percent a month ago.
BSP Officer-In-Charge Armando L. Suratos noted that the January inflation outturn validates the BSP’s view that inflation would converge to the inflation targets of 4.5 ± 1.0 percentage point for 2010 and 4.0 ± 1.0 percentage point for 2011, in the absence of unanticipated shocks to prices. On this basis, the BSP believes that current monetary policy settings remain appropriate, supportive of the need to safeguard price stability and at the same time foster sustained economic growth. He stressed that the BSP will remain steadfast in monitoring economic and financial developments here and abroad to detect any possible build-up in both demand and supply-side inflationary pressures, and pre-emptively revisit and calibrate monetary policy settings when warranted.