November inflation rate drops to 9.9 percent
Des Ferriols
Philippine Star
The national inflation rate slid back to single-digit levels earlier than expected, dropping to 9.9 percent in November from 11.2 percent in October as prices of basic commodities fell in the wake of weakening oil prices.
“This is a pleasant surprise,” said central bank governor Amando Tetangco, adding that inflation was dropping faster than expected since the Bangko Sentral ng Pilipinas (BSP) had not projected it to drop back to single-digit level until December.
“This gives us greater monetary policy space,” Tetangco said, fanning fresh hopes that the BSP would cut its policy rates when the Monetary Board conducts its last policy-setting meeting this year on Dec. 18.
The BSP has so far resisted pressure to cut its policy rates which the MB last touched when it actually hiked the rates by 25 basis points, raising overnight borrowing or reverse repurchase rate to six percent while the overnight lending or repurchase rate would go up to eight percent.
Faced with the effects of the credit crunch in the US, the BSP has instead made more moves to release liquidity back into the system by reducing the reserve requirements of banks by two percentage points and opening a dollar repurchase facility.
At its most recent policy meeting, the MB decided to leave its policy rates unchanged, indicating that rising core inflation could rule out any rate cut for the remainder of the year.
The November inflation data showed as much, indicating a steady decline in headline inflation but an equally steady build up in core inflation.
The National Statistics Office (NSO) revealed that the national year-on-year headline inflation rate further slowed down to 9.9 percent in November from 11.2 percent in October.
The NSO reported that the deceleration resulted from the continued deceleration in the annual rates of the heavily weighted food, beverages and tobacco (FBT) index together with prices of fuel, light and water (FLW) and services.
Inflation a year ago was 3.2 percent and according to the NSO, the November inflation brought the year-to-date average inflation to 9.4 percent.
However, the NSO report showed that core inflation was still going up, topping at 7.9 percent in November from 7.8 percent in October. The core inflation excluded volatile items such as food and energy prices.
The core inflation is seen as an indicator of domestic demand and despite the decline in the headline inflation, the steady increase in core inflation indicated that there were still upside risks to inflation.
Malacañang attributed the continued decline in the inflation rate to President Arroyo’s management of the economy.
– With Marvin Sy
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