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Philippines: Inflation seen at 17-year high in September

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September 12, 2008

Philippines: Inflation seen at 17-year high in September
Philippine annual inflation may hit a 17-year high in September as a squeeze on agricultural supplies following typhoons forces food prices higher, Reuters quoted a deputy governor of the central bank as saying Thursday.

Still, price pressures were cooling and September's data may represent the peak of this year's pick up in inflation, Diwa Guinigundo told reporters.

He said consumer prices in September may be 12.6 percent to 12.7 percent higher than a year earlier, picking up pace slightly from August, when prices rose 12.5 percent.

The central bank will announce its official September inflation forecast towards the end of this month, while the National Statistics Office will release its inflation data on Oct. 7.

"It might go up from 12.5 percent, but not too much," Guinigundo said. "It may reach 12.6-12.7 percent, then start to decelerate."

Guinigundo said inflation was "losing steam" and was unlikely to reach 13 percent, as the central bank had earlier estimated.

Philippine inflation will reach its summit either this month or the next, he said.

"If there are no typhoons, it could have peaked at 12.5 percent," Guinigundo said. "Even if oil, food prices go down, if there is a typhoon, the impact would be immediate."

"Even if September is an aberration, let's say there was a blip, it (inflation) will not reach 13 percent," Guinigundo said.Philippines data has shown that the price rise between months slowed to just 0.3 percent in August, from 1.6 percent in July.

The data is not seasonally adjusted. The government started flooding the market with cheap rice in July to keep a lid on domestic prices. Fuel prices at the pump have
been declining since early August as world prices have eased.

The Philippines was hit by a typhoon this week and three last month, which may have damaged fruit and vegetable plantations in northern Philippines, Guinigundo said.

The central bank expects inflation to average between 9 percent and 11 percent this year, a sharp climb from 2.8 percent in 2007 and reflecting the sharp rise this year in global oil and food prices.

It sees inflation slowing next year to between 6 percent and 8 percent.

The central bank has raised its policy rates by a total 100 basis points in three months to August to contain red-hot inflation and some analysts said at least one more rate hike within the year was needed to bring inflation under control.

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