8.5% inflation in February well within government target

Inflation went up slightly to 8.5 percent in February, well within the government’s forecast of 8.3 percent to 8.8 percent and most economists’ estimates of 8.5-percent to 8.9-percent range.

The National Statistics Office (NSO) said the slight uptick in inflation in February could be attributed to a rise in the prices of food, beverages and tobacco, housing and repairs and other miscellaneous items.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando Tetangco said the annual inflation rate in February was well within expectations and does not warrant any policy action.

"With demand indicators remaining moderate, monetary action may not be appropriate now," Tetangco said, adding that supply-side factors continue to drive up prices.

Excluding selected food and energy items, core inflation rose to 8.1 percent in February from 7.9 percent in January.

In Metro Manila, inflation rate eased slightly to 8.8 percent in February from 8.9 percent in January while in the provinces, prices remained at 8.3 percent.

However, due to the continued increase in the prices of oil in the global market, the BSP raised the 2005 inflation forecast to 6.7 percent to 6.9 percent from an earlier forecast of 6.4 percent to 6.5 percent.

Assistant BSP Governor Diwa Guinigundo said the revised consumer price index (CPI) forecast should not have an impact on its monetary policy as inflation would continue to be driven by supply-side factors.

The BSP raised its estimate for the average price of crude oil to $42 a barrel in 2005, up $4 from its earlier forecast, Guinigundo said.

Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) director general Romulo Neri said that price cuts in some selected food items, fuel and light mitigated month-on-month increase in prices of goods and services.

The timely deliveries of agricultural products such as eggs, fruits and vegetables, and meat pulled down month-on-month food inflation.

Based on vegetable price monitoring of the Bureau of Agricultural Statistics (BAS), prices dropped for amargoso (from P50 to P45.42), sitao (from P54 to P45.75), cabbage (from P40.83 to P35.42), habitchuelas (from P41.25 to P30), tomato (from P40.83 to P22.08), white potato (from P30 to P27.08), eggplant (from P34.58 to P30.83), and pechay (from P31.67 to P25 ).

The decline in fuel prices and light helped temper inflation for the rest of the non-food items.

The 0.0009 centavos per kilowatt-hour (kwh) reduction in the generation charges as the IPPs (independent power producers) supplying power to Meralco dispatched higher than the contracted level lowered electric bills of Meralco customers in February 2005.

The upward adjustments on prices of dairy products and transportation and communication prevented the year-on-year inflation rate to further decelerate.

On the other hand, the implementation of the increase in the North Luzon Expressway toll fees significantly boosted the overall inflation on transportation and communication. – W ith Ted Torres