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August 29, 2008

Philippines inflation seen to accelerate in August

The Philippine central bank Bangko Sentral ng Pilipinas (BSP) has said price increases may have accelerated this month despite declining international oil prices, reported local daily Manila Bulletin.

The bank’s governor Amando Tetangco, Jr was quoted by the daily as saying that the August inflation is likely to range from 11.8 percent to 12.6 percent due to rising cost of raw materials for food production.

Inflation has been rising fast since the second quarter of the year, hitting the double digit levels at 11.4 percent in June and further rising to 12.2 percent last month, as international oil prices rose above $140 a barrel.

“The main factors that could determine the actual inflation rate for the month are the impact of the onset of the typhoon season and rising costs of raw materials for production of certain food items, which could be balanced off by lower international oil prices,” Tetangco told reporters.

The governor said the BSP will remain watchful over price developments to make sure that its interest rate policy stance is consistent with its price stability mandate.

The bank earlier forecast inflation to range from 9 percent to 11 percent this year, significantly higher than last year’s 2.8 percent average. For next year, the central bank expects inflation to ease to a range of 6 percent to 8 percent.

An economist from Hong Kong and Shanghai Banking Corp. (HSBC) said the increase in Philippine farm output in the second quarter would lessen price pressures.

“Rising production in the sector suggests that price pressures emanating from higher food costs may be easing, traditionally the prime driver of consumer inflation in the Philippines,” Frederic Neumann, HSBC economist, said.

Agricultural output rose 3.7 percent in the second quarter after contracting 1 percent in the previous three-month period.

Neumann said inflation weighed further on household expenditures in the second quarter, as food prices went up particularly on high demand for rice.

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