On a year-on-year basis, headline inflation reached 3.4 percent in February from 3.0 percent in January, within the Central Bank BSP’s forecast of 2.8-3.7 percent for the month. This brought the year-to-date average inflation rate to 3.2 percent, well within the Government’s inflation target range of 3-5 percent for 2013. Core inflation, which excludes certain food and energy items to measure generalized price pressures, also rose to 3.8 percent from 3.6 percent in the previous month. However, month-on-month headline inflation was actually lower at 0.3 percent in February from 0.5 percent in January.
The uptick in inflation was due mainly to higher prices of food, alcoholic beverages and tobacco items, and domestic petroleum products. Food inflation went up as most food commodities, particularly meat, rice, corn, and fish posted higher prices. Likewise, alcoholic beverages and tobacco inflation rose as a result of the implementation of the Sin Tax Reform Act of 2012. At the same time, transport inflation also accelerated due to the adjustments in gasoline and diesel prices, largely influenced by the higher international price of crude oil. The increase in the prices of domestic petroleum products more than offset the lower electricity rates in February.
The February inflation reading remains in line with the BSP’s assessment of a manageable inflation environment over the policy horizon, with average inflation expected to stay within the 3-5 percent target range. Going forward, the BSP will continue to be mindful of emerging inflation risks to ensure that monetary policy settings remain consistent with price stability while being supportive of economic growth.