Inflation will fall to a 22-year low of 1.2 to 2.1 percent this month because of lower electricity charges and slower increases in the prices of oil products and some food items, the central bank said yesterday.
"This [forecast] reflects our expectation of continued milder price increases [for] 2009 and 2010..." Bangko Sentral Governor Amando Tetangco Jr. said in a text message.
The central bank forecasts inflation to average 3.4 percent this year, well within its target of between 2.5 and 4.5 percent.
The International Monetary Fund forecasts inflation in the Philippines at 3.25 percent, lower than the higher range of the central bank's projection. The lower rate of increase in the prices of goods and services is partly due to lower oil prices, which went past $140 a barrel last year.
Central bank officials are pegging their inflation targets on the assumptions set with other economic managers. The monetary authority cut its interest rates by another 25 basis points last month as a result of lower inflation expectations, forecasting it would reach just 3.7 percent instead of 4.1 percent next year.
Inflation reached double-digit levels from 1988 to 1991. It was negative in the first quarter of 1987, but it rose to 1 percent in April of that year and went up steadily to average 4 percent.
Inflation averaged 2.8 percent last year, falling as low as 2.2 percent in March as a result of the strong peso that kept consumer price increases between 2 and 3 percent.
Low inflation has given the central bank the flexibility to ease monetary policy, allowing it to release more funds into the system and help spur economic activity.
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