Inflation Rises to 4.2 Percent in January
Year-on-year headline inflation rose significantly to 4.2 percent in January, which was higher than the 3.5 percent in December and was above the BSP’s monthly forecast of 3.3-4.1 percent for the month. Core inflation, which excludes selected volatile food and energy items to depict underlying demand-side price pressures, edged higher to 3.4 percent in January from 3.3 percent in the previous month. On a month-on-month seasonally-adjusted basis, inflation increased slightly to 0.9 percent in January from 0.8 percent in December.
The higher inflation outturn was due mainly to faster price increases of selected key food items. Inflation for meat remained elevated as the African Swine Fever outbreak continued to adversely affect domestic supply. Year-on-year inflation for fruits and vegetables also increased, further contributing to the rise in food inflation. Fish inflation also went up as a result of reduced supply with the close of the fishing season. On the other hand, year-on-year non-food inflation held steady in January compared to the previous month.
The elevated inflation figure in January is consistent with the BSP’s prevailing assessment of a transitory uptick in inflation in the first half of 2021, largely reflecting ongoing supply-side pressures as well as positive base effects. Average inflation is nevertheless still projected to settle within the 2.0-4.0 percent target range over the policy horizon, particularly as direct measures are being pursued by the National Government to address the availability of affected commodities. The Monetary Board will consider recent price developments, particularly in global commodity markets, along with the Q4 2020 GDP outturn in its assessment of the monetary policy stance in its meeting on 11 February 2021.