Year-on-year inflation in June 2002 fell to 3.0 percent after holding steady at 3.6 percent in the previous three months. Lower rates were recorded during the month for both food and non-food items, particularly fuel, light and water (FLW). The month-on-month inflation rate was unchanged at 0.2 percent for the fourth consecutive month. Average inflation for the first semester stood at 3.5 percent, lower than the government’s revised full-year target of 4.5-5.5 percent.
The first-semester inflation outturn affirms the Bangko Sentral’s expectations of a generally quiescent inflation environment for 2002, with average inflation likely to fall below the government’s target. The combination of well-behaved food prices, stabilizing energy prices, exchange rate stability, and subdued domestic demand conditions underlie the BSP’s benign near-term outlook for consumer prices.
At the same time, monetary authorities continue to keep an eye on a number of potential inflationary risks going forward, particularly those associated with the uncertain impact of the El Niño phenomenon on food prices in the coming months, ambiguity in the direction of world oil prices, and possible adjustments in user charges for utilities. The potential price pressures arising from these factors, along with developments in the real sector, will remain the focus of monetary policy settings in the months ahead.