Inflation in September 2002 remained stable at 2.9 percent year-on-year. This was the same rate posted a month earlier. This development validates the monetary authorities’ belief that inflation will be within target despite the presence of some extraneous pressures arising mainly from market worries over the rising tensions in the Middle East. On a month-on-month basis, inflation slowed down to 0.2 percent from 0.5 percent in August. The drop in the price of electricity since June 2002 coupled with generally lower food prices muted the impact of the increase in prices of other items in the consumer basket such as gasoline products, clothing and related products, as well as housing and repairs.
The September inflation rate is the midpoint of the BSP’s forecast of 2.8-3.0 percent. Average inflation for the first nine months of the year now stands at 3.3 percent, consistent with the BSP’s assessment of a generally benign inflation environment for the rest of the year.
Looking forward, monetary authorities expect stable price movements, with a slight accelerating trend—due mainly to the spillover impact of the recent increases in the pump prices of petroleum products—leading to a whole-year average inflation rate below the government’s full year target of 4.5-5.5 percent. The continued softness in demand—despite moderate improvements of late—combined with favorable food supply conditions are expected to sustain the broad stability in the general price level.
With an underlying benign inflation, the BSP believes that the current monetary policy stance is appropriately supportive of the economy’s growth objective. The future stance of monetary policy will continue to emphasize caution and focus on enabling past interest rate cuts to gear the economy towards a low inflationary growth path.