ASEAN KEY DESTINATIONS
Philippine inflation in check
BSP Governor Amando Tetangco Jr. said this month's price movement may settle within the range of 2.5 percent to 3.4 percent. He said the increase in prices of domestic petroleum products and selected vegetables could have been offset by declines in prices of utilities.
If December inflation falls within the forecast range, then the full-year average would be below the mid-point of the BSP target of 3.5 percent to 5.5 percent, Tetangco said.
"The outlook for inflation over the policy horizon remains favorable. Nevertheless, we continue to monitor developments, particularly in the global front, for potential sources of surprises which could impact domestic demand conditions and price expectations," he said.
Monetary authorities said upside risks to inflation include a sudden stop in capital inflows as a result of the resurgence of risk aversion and changes in monetary policy of the major economies that could affect global growth dynamics.
On November 18, the BSP decided to keep its overnight borrowing or reverse repurchase (RRP) rate at four percent and the overnight lending or repurchase (RP) rate at six percent.
The central bank has kept its policy rates at their lowest levels for one year and four months. The policy-making Monetary Board is scheduled to hold its last meeting for this year on December 29, instead of December 30.
Headline inflation rose slightly to 3 percent year-on-year in November from 2.8 percent in October, which resulted in year-to-date average inflation inching up to 3.8 percent.
"A lot of countries are currently experiencing higher inflation regimes, requiring central banks to hike rates. The Philippines will be no exception," an analyst said.
Inflation will likely hit 5.1 percent in 2011, higher than the expected 3.8 percent this year, Marc Bautista, research head of the Metropolitan Bank and Trust Co.
"Thus, we expect the BSP to be hiking the overnight rates sometime middle of 2011, depending on inflation expectations and liquidity concerns on the ground," he said.
Bautista said there is nothing particularly worrying as yet about Philippine prospects next year.
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