Year-on-year headline inflation for 2016 averaged at 1.8 percent and was below the Government’s inflation target range of 3.0 percent ± 1.0 percentage point for the year. Meanwhile, December inflation increased to 2.6 percent from 2.5 percent in November but was within the BSP’s forecast range of 2.2-3.0 percent for the month. Likewise, core inflation, which excludes certain volatile food and energy items to measure underlying price pressures, also rose slightly to 2.5 percent in December from 2.4 percent in November. On a month-on-month seasonally-adjusted basis, headline inflation inched up to 0.4 percent in December from 0.3 percent in November.
The uptick in inflation in December can be traced mainly to holiday season demand alongside weather-related production disruptions which led to higher retail prices of food, particularly meat, fish, and vegetables. Rice prices were also higher at the end of the harvest season in a number of rice-producing provinces. At the same time, non-food inflation also increased for the month due to higher air and sea travel fares as well as upward price adjustments in domestic petroleum products, mainly gasoline and diesel.
Governor Amando M. Tetangco, Jr. noted that inflation had been on a generally upward trajectory throughout 2016, in line with the national government’s medium-term expectations and the BSP’s projections. Nevertheless, he added that the latest baseline forecasts of the BSP indicate that inflation is likely to return gradually to a path consistent with the inflation target in 2017-2018. Looking ahead, the BSP will continue to closely monitor domestic and global factors to see how these would impact domestic inflation and output conditions to ensure that the monetary policy stance remains consistent with price and financial stability.