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September 5, 2008

Philippines: Central bank to shift policy as inflation peaks
Philippine inflation likely reached its peak earlier than the central bank's estimate of September-October, the bank's governor said on Thursday, signalling a possible shift in the current hawkish monetary policy stance, reported Reuters.

"It's possible it may have peaked earlier than expected," central bank governor Amando Tetangco told reporters a day before the publication of August inflation data. "I'm not ruling it out."

The statistics office will release official August inflation data at 0100 GMT on Friday.

August annual inflation is expected to hit 12.5 percent according to a Reuters poll this week, the highest rate since December 1991.The central bank had forecast inflation last month to come in between 11.8 to 12.6 percent against 12.2 percent in July.

On Wednesday, the central bank said inflation would likely peak in September or October before decelerating to single-digit levels in March or April.

Previously, the central bank had said inflation was expected to reach its summit in October.

"If oil prices continue to go down, that will be good for inflation," Tetangco said.

The central bank has raised interest rates by a total 100 basis points in three months to August to rein in red-hot inflation. The overnight borrowing rate is now at 6 percent, the highest since July 2007.

The central bank expects average inflation this year to reach 9-11 percent against a 2.8 percent average last year. The last time Philippine annual average inflation was at around 9 percent was in 1998 when it hit 9.3 percent.

Inflation is expected to slow to 6-8 percent next year, the central bank previously said.

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