December inflation hits 18-month low

The national average inflation rate fell to an 18-month low of 3.9 percent in December — an achievement President Arroyo attributed to the efforts of her macro-economic team to keep prices down.

Data from the National Statistics Office (NSO) showed the slowdown in price increases for all commodity groups during the month resulted in a full-year inflation average of 6.0 percent, well within the government’s target but higher than the 4.4 percent average in year 2000.

The December figure is still the smallest year-on-year rise since June 2000 when inflation also stood at 3.9 percent. The average for the month of November was 4.4 percent.

"This is really quite an achievement for the macro-economic team," the President said. "This is because we’ve been able to keep price of rice down for the poor. We’ve been able to provide medicines at lower prices. We’ve been able to keep transport prices down."

Mrs. Arroyo was informed of the year-end figures by National Economic Development Authority Secretary General Dante Canlas during her first Cabinet meeting at the Estosan Hotel in Cotabato City yesterday.

The continued decline in inflation comes as a welcome development to government economic planners who have been counting on the stability of domestic prices to give them more room to maneuver in terms of containing interest rates.

The Bangko Sentral ng Pilipinas (BSP) has so far cut interest rates by as much as 700 basis points since January, a move made possible by stable local prices and the steady decline in inflation.

BSP Governor Rafael Buenaventura said the 3.9 percent inflation rate in December was within the forecast rate of 3.9-4.3 percent.

"It gives us the flexibility to cut overnight rates further," Buenaventura said.

The BSP chief earlier hinted that there was room to cut overnight rates by a quarter to half percentage point. The BSP last cut its key rates by a quarter percentage point on Dec. 14, bringing the overnight borrowing rate to 7.5 percent, its lowest level in six years.

"We now have to review our inflation expectations for the next three months," Buenaventura said.

Based on NSO data, inflation in Metro Manila rose to 4.9 percent in December from 4.6 percent in November, ending the year with an average of 7.0 percent.

In mostly areas outside the metropolis, inflation fell to 3.5 percent in December from 4.3 in November, with an average rate of 5.7 percent over the full year.

The NSO said all commodity groups registered lower inflation numbers in December as supply balanced out with demand. Anticipation of a further decline in oil prices also contributed to the easing up of pressure in the commodity groups.

Food, beverages and tobacco declined to 2.3 percent in December from 2.6 percent in November; clothing, 2.9 percent from 3.4 percent; housing and repairs, 6.5 percent from 6.8 percent; fuel, light and water, 6.8 percent from 8.4 percent; services, 6.1 percent from 7.3 percent; and miscellaneous items, 3.0 percent from 3.2 percent. — With Marichu Villanueva