NSCB Resolution No. 6
Series of 2003

ADOPTION OF AN OFFICIAL DEFINITION AND METHODOLOGY OF
CORE INFLATION

WHEREAS, ‘headline’ inflation measures changes in the cost of living based on movements in the prices of a specified basket of major commodities, and refers to the year-on-year change in the Consumer Price Index (CPI);

WHEREAS, headline inflation is often affected by factors beyond the control of economic policy, and has tended to be volatile historically due to temporary shocks or disturbances in a particular area of the economy, causing it to move away from its long-term trend;

WHEREAS, there is a need for a standard conceptual and operational definition of inflation that would capture the permanent component of the inflationary process that can be influenced by monetary policy and take out the effect of transient disturbances on the CPI;

WHEREAS, the concept of ‘core’ or underlying inflation aims to capture the general or underlying trend in prices by filtering out the effects of temporary disturbances or shocks on the CPI;

WHEREAS, an appropriately defined measure of core inflation can serve as a complementary measure to headline inflation that represents the broader or underlying trend in price movements, thereby providing a better gauge of the overall state of the economy and a more reliable basis for economic policymaking;

WHEREAS, a standard definition of core inflation will facilitate the introduction of core inflation statistics into the Philippine statistical system in accordance with international practices on price statistics, and will allow consistency and comparability among agencies in the Philippines;

WHEREAS, the Technical Committee on Price Statistics (TCPS) has held discussions to evaluate the various methodologies for estimating core inflation and approved the definition and methodology for its computation as specified in Annex BR-6-2003-1;

WHEREAS, the NSCB Technical Staff supports the recommendation of the TCPS to endorse to the NSCB Executive Board the approval of the official definition and methodology for the computation of core inflation;

WHEREAS, there have been initial efforts on the part of the BSP regarding information dissemination for core inflation and in response to the need to further intensify the information campaign for core inflation, the BSP has indicated its willingness to provide resources for the said purpose.

NOW, THEREFORE, BE IT RESOLVED AS IT IS HEREBY RESOLVED that the Board approve the recommendation of the TCPS and the NSCB Technical Staff for adoption by concerned government agencies and instrumentalities, the official conceptual and operational definition and methodology for the compilation and computation of core inflation as specified in Annex BR-6-2003-1;

BE IT RESOLVED FURTHER, that: 1) the NSO be responsible for generating and publishing the official statistics on core inflation with base year 1994 in accordance with the approved methodology; publishing also the official core inflation rate alongside the headline inflation rate; and backtracking to 1994 the series of core inflation; and 2) a Task Force be created composed of NSO, BSP, SRTC and NSCB to discuss and recommend strategies for the conduct of advocacy work on the compilation and uses of core inflation;

Approved this 23rd day of June 2003, in Pasig City.

Attested by:

ROMULO A. VIROLA
Secretary General