Inflation eased to an average of 5.9 percent in the fourth quarter 2018 from 6.2 percent a quarter ago, due mainly to the moderation in food prices as supply conditions improved for key food items, the Bangko Sentral ng Pilipinas said in a Fourth-Quarter Inflation Report Friday.
The figure brought the full-year average inflation rate to 5.2 percent, which is above the government’s target range of 2 percent to 4 percent for the year.
Aside from food items, non-food inflation also eased in the fourth quarter, as lower international oil prices exerted downward pressure on transport inflation through lower gasoline and diesel prices.
“By contrast, core inflation rose to 4.9 percent in Q4 2018, higher than the rates posted in the previous quarter and a year ago. Similarly, the BSP’s three alternative measures for core inflation were higher during the quarter,” Bangko Sentral said.
The Monetary Board decided to raise the policy rate anew by 25 basis points during a monetary policy meeting on Nov. 15, 2018, given the assessment that the balance of risks to inflation were still weighted to the upside and inflation expectations have remained elevated.
The Monetary Board believed that favorable prospects for the domestic economy allowed some scope for a measured adjustment in the policy rate to rein in inflation expectations and preempt further second-round effects.
The board deemed it necessary to respond with proactive policy action to help temper the risks to the inflation outlook, including those emanating from the continued uncertainty in the external environment amid tighter global financial conditions and trade tensions among major economies.
But the inflation momentum continued to slow down in December as both food and non-food inflation eased, giving the central bank some latitude to allow its monetary policy adjustments throughout 2018 to work their way through the economy.