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Inflation accelerates to fastest in over three years in January

Inflation accelerated to 4.0 percent in January, the fastest in over three years, largely driven by the first round effects of the government’s tax reform program.

According to the Bangko Sentral ng Pilipinas (BSP), headline inflation clocked in at 4.0 percent in January—the fastest since coming in at 4.3 percent in October 2014.

This compares with 2.7 percent in January 2017, and 3.3 percent last December.

“Due mainly to combined first round effects of TRAIN, oil prices, and food to some extent,” Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla, Jr. said in a text message to reporters.

President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) into law in December. It took effect on Jan. 1, 2018.

Under TRAIN, the government cut the personal income tax (PIT) rate, but expanded the value-added tax (VAT) base.

“We think these are temporary drivers of inflation and would eventually stabilize,” Espenilla said.

“Nevertheless, BSP will be closely monitoring the situation and stand ready to take timely action based on our evaluation of all relevant data,” he said.

The BSP earlier announced an inflation outlook of 3.5 to 4.0 percent in January—KG/VDS, GMA News