(STAR) By Des Ferriols - Inflation rose to 3.2 percent in November from 2.7 percent the previous month due to increases in the prices of food and fuel, the National Statistics Office (NSO) said yesterday.

Consumer prices in November were up 0.6 percent from the previous month, against a 0.2 percent rise in October, the NSO said.

For the January to November period, inflation averaged 2.7 percent, still within government’s target of four to five percent for the whole year.

November’s inflation however was higher-than-expected, with the Bangko Sentral ng Pilipinas (BSP) initially forecasting the figure to come in at between 2.4 and 3.1 percent for the month.

BSP Governor Amando M. Tetangco Jr. said that although slightly higher than the projected rate for the period, the central bank still expected the full-year average to be well below the target rate of three to four percent.

“It still confirms our benign outlook over the policy horizon,” Tetangco said, adding the uptick in November was expected because of the increases in the prices of selected commodities including oil and feeds in the global market.

The NSO reported that inflation for food, beverage and tobacco (FBT) increased to 3.9 percent in November from 3.5 percent in October while fuel, light and water (FLW) rose to 2.1 percent from one percent; and services, 4.4 percent from 3.5 percent.

On the other hand, the NSO said inflation rate for housing and repairs (H&R) and miscellaneous items correspondingly slowed down to 1.1 percent and 1.3 percent from their respective last month’s rates of 1.2 percent and 1.4 percent.

According to the NSO, price increases were faster in rice which charted an inflation rate of seven percent in November from 6.7 percent October. Corn prices also increased by 3.1 percent from 2.7 percent. The increase in the prices of dairy products likewise sped up to 7.5 percent from 6.8 percent in October followed by fish products, fruits and vegetables.

“We expected inflation to be somewhat higher because of the price increases in local petroleum products and certain food items,” Tetangco said. “There were also increases in waves in some regions as well as price hikes in beverages.”

Mitigating the pressure on prices, was the appreciation of the peso which Tetangco said continued to dampen the translation of the price surges in oil prices in the global market.

“Prices were also sticky because producers were trying to protect their market shares from imports that have started coming in,” Tetangco said. “That and the appreciation of the peso would prevent bigger surges in prices.”

According to Tetangco, the BSP remains confident that the 2007 national average inflation rate will be within the 2.6-to-3.1-percent range and that the 2008 average rate would also be somewhere between three and four percent.

The strength of the peso, Tetangco explained, has been successful at providing a significant cushion against the full brunt of the oil price hikes in the world market.

This means that the pass-on effect of higher fuel prices on domestic market had been largely contained as the peso continued to soar against the US dollar, buoyed by robust foreign exchange inflows.

However, the BSP will have to contend with potentially inflationary factors such as the P2 increase in jeepney fares that operators have been lobbying for.

Tetangco said the proposed increase in transport fares would still fit into the BSP’s inflation forecast for 2008 and 2009 but officials still worry about second-round effects.

Tetangco said the increase in transport fares could eventually have an impact on wages and other economic prices that ultimately affect the inflation rate.

“The current forecasts have enough buffer that could absorb many of these unpredictable sources of additional pressures including the proposed transport fare increase,” Tetangco said. “It’s the second-round effects of any fare increases on wages and other economic prices that become cause for concern.”

Chief News Editor: Sol Jose Vanzi

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