File photo. Vendors and customers are seen inside a market in Quezon City, Metro Manila, Philippines, on Feb 5, 2021. (Photo: Reuters/Eloisa Lopez)
January’s inflation figure, which was slightly below the 3.1 per cent forecast in a Reuters poll, used 2018 as the base year and, at least for now, suggests no sign of price pressures pushing policy makers to tighten loose monetary policy.
The Philippine statistics agency changed the base year for the consumer price index (CPI) to 2018 from 2012 starting in January, resulting in new weightings for components of its CPI basket.
The rebasing resulted in a lower average inflation rate of 3.9 per cent in 2021, which was inside the central bank’s 2 per cent to 4 per cent target.
“It supports the narrative that inflation is on its downward trajectory,” Bangko Sentral ng Pilipinas Governor Benjamin Diokno told reporters.
Inflation is projected to ease close to the midpoint of the central bank’s 2 per cent to 4 per cent target range for 2022 and 2023, which should allow policymakers to maintain a stance of keeping interest rates low to support economic growth.
The central bank, which has kept its policy rate unchanged at 2 per cent since November 2020, will meet on Feb 17.
Food and non-alcoholic beverages remain the biggest commodity group in the rebased CPI basket, with a 37.75 per cent weighting, followed by housing, water, electricity, gas and a grouping with other fuels, which have a combined weighting of 21.38 per cent.
The rebasing is done periodically by the statistics agency to reflect changing consumption patterns and align the base year with the one used for gross domestic product.