Inflation rises to 3% in November

MANILA, Philippines - After slowing down for two straight months, the nationwide inflation rate inched up to three percent in November from 2.8 percent in October due to more expensive power and petroleum products as well as the slight uptick in food prices, the National Statistics Office (NSO) reported yesterday.

Last month’s average inflation was above the two percent to 2.9-percent forecast set by the Bangko Sentral ng Pilipinas (BSP) and the market consensus of 2.5 percent.

The government said inflation in the National Capital Region (NCR) shot up to 3.6 percent in November from 2.2 percent in October on the back of higher annual price adjustments in the food, beverages, and tobacco (FBT) as well as housing and repair (H&R) and fuel, light and water (FLW) while inflation in areas outside NCR eased to 2.8 percent from 2.9 percent.

Inflation for the FLW group zoomed to 12 percent from 8.3 percent due to higher charges for electricity rates in NCR and in selected regions and the price uptick in LPG, kerosene, gasoline and diesel. Electricity prices went up in November with the higher cost of power from the National Power Corp. and the Wholesale Electricity Spot Market while prices of petroleum products also went up.

The services group booked a higher inflation of 3.8 percent last month from 3.7 percent in October while the inflation of the H&R index inched up to 1.9 percent from 1.8 percent.

The NSO said the FBT index slowed down to 1.9 percent from two percent despite the slight uptick in the prices of selected food items such as fish, vegetables and chicken while inflation for the clothing index eased to 1.7 percent from 1.9 percent.

Annual inflation for the food index alone was steady at two percent in November as prices of meat and rice were stable.

BSP Governor Amando M. Tetangco Jr. said in a text message to reporters that the November inflation that was primarily driven by the jump in the annual growth rate of FLW resulted to an average inflation of 3.8 percent in the first 11 months of the year from 3.2 percent in the same period last year.

“The November rate brings the year-to-date actual average inflation to 3.8 percent close to the lower end of the full-year target of 3.5 percent to 5.5 percent,” Tetangco stressed.

The BSP has set an inflation target of 3.5 percent to 5.5 percent this year and three percent to five percent between 2011 and 2014. It expects inflation to average 3.63 percent instead of 3.8 percent this year and 2.35 percent instead of 2.95 percent next year.

“The November inflation reading supports the BSP’s assessment of a favorable inflation environment over the policy horizon,” Tetangco stressed.

The BSP has kept interest rates at record lows for 12 straight policy setting meetings. The BSP slashed its key policy rates by 200 basis points between December 2008 and July 2009 to cushion the impact of the global financial crisis on the domestic economy.

The overnight borrowing rate is currently pegged at a record low of four percent and the overnight lending rate is at six percent.

“Going forward, the BSP will continue to be closely attentive to inflation risks to ensure that the monetary policy stance remains consistent with the price stability objective,” the BSP chief added.

Barclay Capital economist Prakriti Sofat said in a study entitled “Philippines: Upside inflation surprise, but manageable outlook suggests BSP on hold well into 2011” that the central bank would likely keep its key policy rates during their last meeting scheduled on Dec. 30.

“Given the relatively benign inflation backdrop and BSP’s concerns that rising interest rate differentials could complicate monetary policy, we maintain our view that the central bank will remain on hold well into 2011,” Sofat stressed.