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January Inflation at 3.5 Percent

02.04.2011

Year-on-year headline inflation stood at 3.5 percent in January, well within both the Government’s target range of 3.0-5.0 percent and the BSP’s forecast range for the month.  January inflation was higher than the December level of 3 percent.  Month-on-month headline inflation in January was also higher at 0.8 percent from 0.5 percent in December.  Meanwhile, core inflation, which excludes certain food and energy items to measure generalized price pressures, decreased marginally to 3.3 percent from 3.4 percent in the previous month.   

Higher inflation in January was traced mainly to higher prices of food and energy items.  These in turn were linked to increased prices in the international market in the case of petroleum products, and the impact of domestic weather conditions in the case of food items such as fish and fruits and vegetables.  Higher energy distribution costs also contributed to the higher inflation rate for the month. These factors represent supply-side pressures on prices which, if sustained, could subsequently trigger second-round effects on demand.

Governor Amando M. Tetangco, Jr. noted that, notwithstanding recent supply-side pressures, the January inflation reading, combined with stable core inflation and well-behaved inflation expectations, remains in line with the BSP’s assessment of a manageable inflation environment over the policy horizon.  Going forward, he emphasized that the BSP will continue to be vigilant against any emerging inflation risks to ensure that the monetary policy stance remains consistent with the price stability objective.

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