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July 3, 2008

Philippine central bank to act on rising inflation
The governor of the Philippine central bank Amando Tetangco said Wednesday it was ready to take "necessary action" with inflation widely expected to have hit double-digits last month.

Ahead of the release Friday of June inflation data, he said "inflation will reach double-digits beginning in June" and peak within the next three months.

He said it would then settle to an average of 7.0-9.0 percent, which is above the government's target.

The bank last month hiked key interest rates by 25 basis points -- to 5.25 percent for the overnight borrowing rate and to 7.25 percent for the overnight lending rate -- after inflation hit a nine-year high of 9.6 percent in May.

Tetangco also said "the Monetary Board believes that there are already indications that supply-driven pressures are beginning to feed into demand."

The central bank "remains committed to pursuing the necessary monetary action to address the risks to inflation and inflation expectations and ensure the achievement of the central bank's price stability objective," he added.

The central bank expects 2009 inflation to ease to 4.0-6.0 percent.

"In the absence of persistent sharp surges in oil prices, base effects should produce lower inflation rates next year and beyond," Tetangco said.

"Meanwhile, favourable projections for global and domestic agricultural output should help to stabilise food prices.

"The slowdown in global economic activity is also expected to contribute to moderating demand for oil and food products, which should enable an easing in imported commodity prices."

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