January Inflation Rises to 8.7 Percent

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Headline inflation rose to 8.7 percent year-on-year in January 2023 from 8.1 percent in the previous month. This was above the BSP’s forecast range of 7.5-8.3 percent and the Government’s average inflation target range of 2.0-4.0 percent for the year. Similarly, core inflation, which excludes selected volatile food and energy items to depict underlying demand-side price pressures, increased to 7.4 percent in January 2023 from 6.9 percent in December 2022. On a month-on-month seasonally adjusted basis, inflation went up to 1.0 percent in January 2023 from 0.3 percent in the previous month.

The higher inflation was traced to non-food items, particularly the increase in housing and utilities inflation with higher electricity generation charges and the implementation of the approved water rate rebasing during the month. At the same time, food inflation also increased particularly for vegetables and fruits due to agricultural damages from heavy rains during the month, while inflation for dairy products and eggs rose to double-digit rates. Fish inflation also accelerated as the implementation of the closed fishing season and cold weather conditions limited the supply of fish.

The January 2023 inflation data points to the need for sustained efforts to combat price pressures, particularly non-monetary government measures to mitigate the impact of persistent supply-side constraints. The BSP remains focused on restoring inflation to the government target and stands ready to adjust its monetary policy settings as necessary to anchor inflation expectations and safeguard the inflation target over the policy horizon.