Philippines: Inflation accelerates in January on higher food prices
February 4, 2011
In January, consumer prices added 0.77% over the previous month, following on a 0.54% increase registered in December. The monthly price increase mainly reflected increasing food prices, which rose 1.07% over the previous month. As a result of the pronounced monthly price rise, annual headline inflation jumped from 3.0% in December to 3.5% in January, exceeding market analyst expectations of a 3.3% inflation rate. In contrast, the annual core inflation rate, which excludes the price volatility associated with items such as oil and food, inched down from 3.4% in December to 3.3% in January. Annual average inflation, which is the reference rate used by the Central Bank, fell slightly from 3.8% in December to 3.7% in January, remaining below the target rate of 4.0% (1% tolerance margin), set by the Bank for 2011. Against this backdrop, on 10 February, the Central Bank left interest rates unchanged at a record low of 4.00%. Monetary authorities justified their decision by quoting stable inflation and ?manageable? inflation expectations. However, policymakers warned about possible supply shocks originating from higher global food and oil prices, which may shift the inflation outlook to the upside in the near future.