Inflation slowed to 1.3 percent in January on the back of lower utility rates and transport costs as well as stable food prices.
The rate of increase in prices of basic goods at the start of the year was within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 0.8-1.6 percent, BSP Governor Amando M. Tetangco Jr. noted in a text message to reporters Friday.
January inflation was below the 2.4-percent year-on-year rise in the same month last year as well as the 1.5 percent posted last December.
“The slower inflation outturn was primarily due to lower utility rates and transport prices, among others. Our view remains to be that monthly inflation will slowly rise to within the target range for 2016 and 2017” of 2-4 percent, Tetangco said.
For the rest of the year, upside risks to inflation “continue to emanate from a stronger-than-expected El Niño and potential adjustments in electricity rates given pending petitions,” the BSP chief said.
Tetangco said the BSP was monitoring “hints of even slower global growth and more volatility in financial and commodity markets, to see if the balance of risks is tilting such that there is need for adjustment in policy stance.” The Monetary Board will meet on Thursday next week to discuss monetary policy settings.
Separately, Economic Planning Secretary Emmanuel F. Esguerra also attributed the lower inflation last month to “slower price adjustments in both food and non-food items,” while prices of food products such as cheese, eggs, fish, fruits, milk and vegetables stabilized during the period.
“Good weather conditions at the onset of 2016 allowed prices of these food items to stabilize. This was an improvement from the previous month when typhoon ‘Nona’ pushed up prices due to hampered production, transport and delivery of agricultural products in the affected areas,” Esguerra, who is also the director-general of the National Economic and Development Authority, said in a statement.
As for non-food items, headline inflation was pulled down primarily by lower oil and transport costs. Transportation regulators implemented a 50-centavo cut in minimum jeep fare to P7 last January.
“Domestic prices of petrol—gasoline, liquefied petroleum gas, diesel and gasoline—continued to go down. This was still due to persistent global oversupply and record stockpile of crude oil which weakened prices of Dubai oil, Brent and West Texas Intermediate,” Esguerra noted.
However, the Neda chief warned that “for the first few months of 2016, risk of higher food prices remain.”
“While it is noted that El Niño will gradually weaken beginning next month, the onset of the summer season may constrain farm output,” he explained.