Year-on-year headline inflation for the whole year of 2012 averaged 3.2 percent, well within the Government's target range of 3-5 percent for the year. Inflation in December increased slightly to 2.9 percent from 2.8 percent in November, and was within the BSP’s forecast of 2.6-3.5 percent for the month. By contrast, core inflation, which excludes certain food and energy items to measure generalized price pressures, decreased slightly to 3.3 percent from 3.4 percent in the previous month. Likewise, month-on-month headline inflation was lower at -0.1 percent from 0.1 percent in November.
The slightly higher December inflation was due largely to seasonally higher food prices. Tight domestic supply conditions, triggered by the recent weather-related production disruptions, as well as the onset of holiday season demand led to higher retail prices of food, particularly rice, fish, fruits, vegetables, and meat. Meanwhile, non-food inflation went down given lower charges for household electricity rates due to lower demand.
Governor Amando M. Tetangco, Jr. noted that the latest inflation data continue to be consistent with the BSP’s assessment of a favorable inflation environment over the policy horizon, with average inflation for 2013 and 2014 remaining within the lower bound of the target. The downside risks associated with the continued weakness in global economic growth are expected to contribute to a manageable inflation environment. He stressed that the BSP will continue to closely monitor emerging developments on both the domestic and global fronts to ensure that monetary policy settings remain supportive of non-inflationary growth.