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September Inflation Drops to 3.5 Percent

10.05.2010

Headline inflation dropped to 3.5 percent year-on-year in September from 4 percent in August.  The resulting year-to-date average went down to 4.1 percent from 4.2 percent, remaining well within the Government’s target range of 3.5-5.5 percent for 2010.  Core inflation, which excludes certain food and energy items to measure broad-based price pressures, also dropped to 3.8 percent from 4.2 percent in the previous month.  Similarly, the month-on-month headline inflation went down to -0.2 percent in September from the previous month’s rate of 0.2 percent.     

The September inflation data showed most commodity groups posting lower readings.  Inflation for light went down with the lower cost of power from the Wholesale Electricity Spot Market (WESM), and inflation for fuel declined as year-on-year LPG inflation fell in September relative to August.  Food inflation also declined in September,  mainly due to lower prices of vegetables as well as chicken and pork.

According to BSP Officer-in-Charge Nestor A. Espenilla, Jr., the lower-than-expected inflation reading in September provides flexibility to the Monetary Board when it meets this week to discuss the monetary policy stance.  Other indicators that will need to be considered in determining the monetary policy stance include inflation expectations, demand and supply conditions, and external economic conditions.  He emphasized that the BSP continues to keenly monitor price pressures over the policy horizon so that it can effectively and pre-emptively ward off threats to price stability.

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