INFLATION eased to 7.1 percent in January, its slowest pace in 10 months, following the continuing drop in commodity prices, the government said yesterday.

That compared with 8.0 percent in December and 4.9 percent a year ago, the National Statistics Office said.

The government?s economic managers are aiming at an inflation rate of between 6.0 and 8.0 percent this year.

The central bank said another round of interest rate cuts was possible as a result of the lower inflation.

?This confirms our expectation for continued slowdown in price increases and gives the [Bangko Sentral] more room to support the economy,? Bangko Sentral Governor Amando Tetangco Jr. said.

The central bank could bring its rates down to 4.0 or 4.5 percent in the second quarter from 5.0 percent now to encourage more borrowing, Citibank analyst Jun Trinidad said.

?We think the balance of risk coupled with lower inflation expectations? ushers the strong likelihood [of a cut in the central bank?s overnight rates],? he said.

The central bank cut its overnight borrowing rate to 5.0 percent, and its lending rate to 7.0 percent, in January in anticipation of slowing inflation this year.

The Monetary Board, the central bank?s policy-making body, said inflation was easing due to falling commodity prices and lower demand.

But some risk remained as a result of volatile oil prices and the peso?s fluctuating exchange rate against the dollar, it said.

The NSO said core inflation, which excludes selected food and energy items, decelerated to 6.9 percent in January from 7.3 percent in December.

But month-on-month inflation picked up, to 0.3 percent in January from negative 0.9 percent in December, because of the increasing prices of heavily weighted food items.

Food prices rose 12.7 percent in January, although that was slower than the 13.3-percent year-on-year adjustment in December.

The prices of fuel, light and water declined by 3.8 percent in continuation of their 1.7- percent drop in December.

The government also noted slower inflation for clothing (4.3 percent from 5.0 percent), housing and repairs (4.3 percent from 5.3 percent), services (3.2 percent from 4.6 percent), and miscellaneous items (3.6 percent from 3.9 percent). Roderick T. dela Cruz and Eileen A. Mencias