Inflation in January accelerated to a two-year high of 4.2 percent from 3.5 percent in December 2020 due to the uptick in food prices and transport costs, data from the Philippine Statistics Authority showed Friday.
The January figure breached the inflation target band of 2 percent to 4 percent set by the Bangko Sentral ng Pilipinas for the year. It was the fastest inflation rate in two years since it settled at 4.4 percent in January 2019.
The PSA said in a statement the overall inflation was pushed up by the higher annual increment of the heavily-weighted food and non-alcoholic beverages at 6.2 percent in January, up from 4.8 percent in December 2020.
“Also contributing to the uptrend in the country’s inflation were the higher annual increases in the indices of transport at 8.6 percent, and restaurant and miscellaneous goods and services at 3.0 percent,” the PSA said.
BSP Governor Benjamin Diokno said despite the uptick in consumer prices, it was still consistent with the BSP’s assessment of a transitory increase in inflation in the first half.
“Average inflation is still seen to settle within the 2 percent to 4 percent target range over the policy horizon,” Diokno said in a statement.
He said the uptrend in inflation was seen as temporary. “The Monetary Board will consider recent price developments, particularly in global commodity markets, along with the fourth quarter 2020 GDP outturn in its assessment of the monetary policy stance in its meeting on Feb. 11, 2020,” Diokno said.
He said the BSP remained ready to deploy its full arsenal of instruments as needed to fulfill its mandate to maintain price and financial stability.
Meanwhile, inflation decelerated in the indices of alcoholic beverages and tobacco at 11.7 percent, and furnishing, household equipment and routine maintenance of the house at 2.9 percent.
The rest of the commodity groups retained their previous month’s annual rates, except for recreation and culture whose annual rate decreased further by 0.7 percent during the month.
Excluding selected food and energy items, core inflation picked up 3.4 percent in January 2021. Core inflation in December 2020 and in January 2020 was both registered at 3.3 percent.
Inflation for food index at the national level jumped to 6.6 percent in January from 4.9 percent in December 2020. In January 2020, inflation for food stood at 2.1 percent.
The indices of meat and vegetables both registered double-digit annual increments of 17.1 percent and 21.2 percent, respectively.
Faster annual increases were recorded in the indices of corn, 1.6 percent; other cereals, flour, cereal preparation, bread, pasta and other bakery products, 2.1 percent; fish 3.7 percent; oils and fats, 2.9 percent; and fruits, 9.0 percent.
ING Bank Manila senior economist Nicholas Mapa said in a report following the release of the January data that a string of destructive typhoons in late 2020 caused supply disruptions that pushed vegetable and fruit prices higher while the spread of African Swine Fever triggered a sharp run-up in pork and other meat products with supply affected by the disease.
“Meanwhile, the recent rise in global crude oil prices nudged transport costs higher with retail gasoline outlets raising prices at the pump on a weekly basis in January,” Mapa said.
He said this was the first breach of the target band since 2018 when inflation surged to a high of 6.7 percent driven also by rising food prices and higher transport costs.
“We expect inflation to remain elevated in the coming months with base effects and persistent cost side pressures to force the headline close to or above the 4-percent level,” Mapa said.
He said that despite the surge in January inflation, he was not expecting the Bangko Sentral to adjust its policy stance at its policy meeting next week given the fragile state of the economy with first-quarter 2021 GDP expected to remain in contraction.
“We expect BSP to refrain from adjusting policy in the near term as Diokno provides monetary support to the economic recovery with monetary authorities hoping to ride out this latest breach until supply conditions normalize in the coming months,” Mapa said.
The BSP cut the policy rates by 200 basis points last year to a record-low 2 percent in a bid to provide support to a sagging economy that contracted by a record 9.5 percent in 2020 amid the global pandemic.