PRICES rose by 4.3 percent last month, the lowest in nearly three years, according to the National Statistics Office.

The December inflation brought the whole year average to 6.2 percent, down from 7.6 percent last year.

Bangko Sentral Gov. Amando Tetangco Jr. said lower inflation will give monetary authorities "greater latitude" in keeping interest rates down.

The monetary board kept the BSP’s overnight borrowing and lending rates unchanged at 7.5 percent and 9.25 percent, respectively, in its Dec. 28 meeting due to the easing of consumer prices.

The BSP is targeting a 4-5 percent increase in prices in 2007.

The December inflation rate fell within the BSP’s forecast of 4.2 percent to 4.8 percent for the month.

The rate was 4.7 percent in November and 6.7 percent a year earlier.

The last time the rate was at the 4.3 percent level was in April 2004.

Tetangco said rising peso and falling oil prices will help temper the rise in consumer prices.

But at the same time, he said, the BSP is keeping tab on external developments that may disrupt oil prices as well as sustained rise in domestic liquidity, which may fuel inflationary pressures.

Planning Secretary Romulo Neri said the inflation slowdown was due to stable food and energy prices.

He added the series of rollbacks in the prices of petroleum products, which resulted in discounted jeepney fares in the National Capital Region, pulled the services index down by 0.2 percent.

Ample supply of food items like fruits and vegetables brought the index of food and vegetables down by 1.5 percent. – Max Estayo and Ruelle Albert Castro