Inflation in February 2002 continued to decelerate to 3.4 percent year-on-year from 3.8 percent in January 2002 bringing the year-to-date inflation to 3.6 percent. The February inflation was lower than expected due mainly to the sustained slowdown in price increases across all commodity groups particularly, food, beverage and tobacco (FBT) with the exception of clothing which maintained its year-on-year inflation of 2.8 percent in the previous month.
The inflation data for February affirms further the broad outlook of a benign inflation environment for the rest of the year consistent with the BSP’s current assessment of the direction of prices in 2002. Based on expectations of restrained demand-pull inflationary pressures as well as favorable supply-side trends particularly in food and energy prices, the average inflation rate for 2002 is expected to settle at least well within, if not lower than, the government’s target of 5-6 percent.
Moving forward, the monetary authorities will continue to be guided by this inflation outlook, together with the movements of other economic and financial indicators such as domestic liquidity and growth numbers. The BSP will continue to ensure sufficient liquidity in the system to fuel the requirements of a growing economy, while guarding against potential risks to inflation that could threaten the price stability objective of monetary policy.