The rate of increase in consumer prices further eased to 11.2 percent in October from 11.8 percent in September, thanks to the decline in food and fuel prices in the world market, the government reported Wednesday.

Release of inflation data on Wednesday allowed the peso to bounce back to the 47-per-dollar territory in intraday trade before closing at 48.06 to the greenback as against 48.41 on Tuesday.

The peso reached an intraday high of 47.905 and a low of 48.28. The volume of trading on the currency spot market totaled $775.1 million.

“What we saw today was some bargain hunting, although not necessarily substantial portfolio inflows,” said Jonathan Ravelas, market strategist at Banco de Oro Unibank. “The fact that inflation outlook was improving and oil prices were falling also resulted in less demand for dollars.”

In its monthly inflation report, the National Statistics Office (NSO) said price movements in October brought average inflation in the first 10 months of the year to 9.4 percent.

Core inflation, which excludes volatile prices of selected food and energy items, hit 7.8 percent in October from 7.5 percent the previous month.

Monetary authorities have conceded that the official inflation target of 3.0-5.0 percent for the full year is no longer attainable, given the abnormal increase in oil prices and the rice crisis that hit the country earlier this year.

However, inflation already peaked in August, when it reached a 17-year high of 12.5 percent. Analysts say it may return to a single-digit level in the first quarter of 2009.

“As expected, inflation further decelerated in October on account of significant retreat in food and fuel prices,” Amando Tetangco Jr., governor of the central bank, said in a text message to reporters.

Data from the NSO showed prices of food, beverage and tobacco (FBT) rose 15 percent year-on-year in October, slower than the 16.1 percent in September. Similarly, prices of services items decelerated to a growth of 10.2 percent from the previous month’s 12.1 percent.

However, inflation for clothing inched up to 4.9 percent from 4.8 percent, while that for housing and repairs accelerated to 5.3 percent from 5.2 percent.

The commodity group fuel, light and water (FLW) also registered faster inflation of 10.7 percent from 8.5 percent, and miscellaneous items recorded an inflation of 3.7 percent from 3.5 percent.

The increase in inflation for FLW was brought largely by higher prices of electricity and water, even as fuel prices already began to decline.

Tetangco said the softening increase in consumer prices gave the central bank flexibility to reconsider its monetary policy.

The central bank’s interest rates on overnight borrowing and lending stand at 6.0 and 8.0 percent, respectively, following a series of monthly hikes that started in June and ended in September. Edited by INQUIRER.net