Philippine central bank sees March inflation at 4-5pct

28-Mar-2011 Intellasia | Asia One | 7:01 AM Print This Post

Philippine inflation could rise to its highest in two years in March on high cost of imported fuel, with consumer prices likely to peak in the second or third quarter, the central bank governor said on Friday.

The central bank raised its key policy rate by 25 basis points to 4.25 percent on Thursday, its first increase since the end of the global financial crisis, to dampen rising inflation. Analysts said more rate hikes were likely in the coming months.

Amando Tetangco, central bank governor, said annual inflation in March would likely come in between 4.0 and 5.0%, with the upper end of the range hitting the highest since March 2009 when the rate was 6.4%.

“Volatility in the international price of oil, and increases in domestic prices of food products may have offset the price dampening effect of the peso appreciation,” Tetangco told reporters via a mobile phone text message.

The Philippines imports almost all of its crude oil requirements and is one of the world’s largest rice importers.

Tetangco said the central bank expects inflation to peak either in the second or third quarter of the year, supporting expectations of further monetary tightening.

The central bank’s next policy review is on May 5.

“Being a net food and fuel importer, the economy remains vulnerable to commodity price shocks especially in the context of recent upswings in global food and crude prices,” Radhika Rao, economist at Forecast Pte said in a research note.

“We see little room for complacency, with further upward adjustments to policy rates on the cards,” Rao said, adding she expects at rate hikes totalling at least 75 basis points this year, starting as early as May.

The central bank said it expects the average inflation rate to come near the high end of the government’s target range this year, but sees the rate slowing next year to settle within the 2012 inflation goal.

The government is targetting an annual inflation rate of 3 to 5 percent for this year and next. percent2BNews/Business/Story/A1Story20110325-270057.html


Category: Philippines

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