The Research and Information Group of the Makati Business Club expects the inflation rate in January 2002 to slow down further to 3.7%- 3.9% from 3.9% in December 2001. Stable oil and food prices that prevailed during the month will make this possible.

Oil companies have rolled back fuel pump prices by an average of 35 centavos per liter during the month. The price of rice is expected to remain stable since agriculture officials estimate palay production to grow by 10.9% in the first quarter. These trends will offset rising water and expressway toll rates.

Bangko Sentral Governor Rafael Buenaventura also believes the January inflation will be lower than last December's rate. The growth in domestic liquidity has remained moderate as of October 2001. The projected drop in inflation provided a signal to monetary authorities to bring down its policy interest rates by 25 basis points. The Monetary Board has restored liquidity reserve levels back to the pre-July 2001 rate of 7.0%. BSP has implemented a shift in monetary policy to inflation targetting starting 2002.