Inflation eases to 4.3% in Aug

MANILA, Philippines - Annual inflation slowed down in August, the National Statistics Office (NSO) reported yesterday, citing continued easing in prices of food and non-alcoholic beverages.

Inflation slowed to 4.3 percent in August from 4.6 percent in July, bringing the average inflation in the first eight months of the year to 4.3 percent from 4.2 percent in the same period last year.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. told reporters on the sidelines of the high-level regional policy dialogue entitled “Asia Pacific Economies after the Global Financial Crisis” that inflation last month fell within the central bank’s forecast of 3.9 percent to 4.8 percent.

“That confirms our assessment that the inflationary pressures have moderated and that inflation is now going to be within the target range of the BSP, which means that given these the fact that there’s been some slowdown in econ growth, the stance of Monetary policy will have to be supportive of sustained growth for the economy,” Tetangco stressed.

He pointed out that monetary authorities are confident that the inflation target of three percent to five percent set by the BSP for this year would be achieved.

“With the year-to-date average of 4.3 percent, we are poised to meet the full-year inflation target. The August turnout supports our assessment of a manageable inflation environment over the policy horizon. Easing core inflation also weakens the broad-based inflation,” Tetangco stressed.

Data released by the National Statistics Office (NSO) showed that core inflation – which strips the volatile food and fuel items – eased to 3.4 percent in August from 3.7 percent in July. Core inflation slowed to 3.5 percent in the first eight months of the year from 3.8 percent in the same period last year.

“Slowdowns in the indices of clothing and footwear; housing, water, electricity, gas and other fuels; recreation and culture; and education and a negative annual change in communication index also contributed to the inflation downtrend,” NSO said.

Headline inflation came in near the low end of the BSP’s forecast of 3.9 percent to 4.8 percent, which also used the 2000 base.

The central bank wants to keep average inflation this year at three percent to five percent.

It expects inflation to peak around five percent in the fourth quarter, lower than previously thought.

The bank, which uses inflation targeting model to set its policy, is widely expected to keep its benchmark interest rates steady in its policy review on Thursday after weaker-than-expected economic growth in the second quarter.

In June, the BSP Monetary Board kept its overnight borrowing rate unchanged at 4.5%, but raised banks’ reserve requirements to temper rising liquidity.

He pointed out that the BSP would continue to monitor emerging conditions in the Philippines and abroad to detect any possible build up in inflationary pressures and would remain prepared to adjust its monetary policy settings as needed to preserve price stability.

“Nevertheless, we will remain watchful of movements in global commodity prices, given the increased uncertainty in the growth prospects of advanced economies which could lead to speculative activity in commodities (including oil) and risk aversion,” the BSP chief added.

Based on 2006 prices, the NSO reported that inflation eased to 4.7 percent in August from 5.1 percent in July due to the continued deceleration in the annual increment in the heavily weighted food and non-alcoholic beverages index as well as slowdowns in the indices of clothing and footwear. Inflation for housing, water, electricity, gas and other fuels; recreation and culture; and education and a negative annual change in communication index also contributed to the downtrend.

Data showed that annual inflation in the National Capital Region (NCR) slowed down to 3.3 percent in August from four percent in July due to lower annual movements in food and non-alcoholic beverages; alcoholic beverages and tobacco; clothing and footwear; housing, water, electricity, gas and other fuels; and transport indices.

Annual inflation in Areas Outside the National Capital Region (AONCR) slowed to 5.1 percent in August from 5.3 percent in July on the back of the slower annual adjustments in food and non-alcoholic beverages; clothing and footwear; and education indices and to the negative annual rate in the communication index.