MANILA, Philippines--The increase in consumer prices accelerated in October as Tropical Storm ?Ondoy? and Typhoon ?Pepeng? disrupted the supply flow of various commodities, according to Bangko Sentral ng Pilipinas projections.

The BSP projected that the annual inflation rate in October would likely be between 0.8 and 1.7 percent, up from the 0.7 percent recorded in the previous month.

The projected range for October, however, is still much lower than the 11.2 percent registered in the same month last year.

Inflation surged to record highs last year due to supply-related problems and the growing demand especially from the robustly growing economies of China and India. The inflation rate decelerated dramatically as global demand for goods and services turned sluggish due to the global economic crisis.

?[The inflation] forecast for October incorporates the estimated impact on agricultural output of Ondoy and Pepeng, as well as the increases in domestic fuel pump prices,? BSP Governor Amando Tetangco Jr. said in a text message to reporters.

Due to Ondoy and Pepeng, there had been difficulties in transporting agricultural produce from the North to other parts of the country. Add to this, fuel prices in the world market have been increasing partly due to the gradual rise in global demand, which led to increases in domestic oil prices.

Despite the projected rise in inflation in October, Tetangco said, the full-year inflation rate would still be well within the official target of between 2.5 and 4.5 percent.

Based on the central bank?s inflation forecast for the month, the average increase in consumer prices for the first 10 months of the year would settle between 3.1 and 3.2 percent. In the first nine months, the average inflation stood at 3.4 percent.

Tetangco said the inflation forecast would be considered by the Monetary Board during its policy rate-setting meeting on Nov. 5.
The Monetary Board will decide what to do next with the policy rates after these were retained at their historic lows in its meetings on Aug. 20 and Oct. 1.

In the policy meetings between December 2008 and July this year, the BSP implemented a series of rate cuts with the aim of pump-priming the economy amid the global economic downturn. Afterward, the BSP decided to pause, saying it needed to assess first the economic environment to know whether further reduction was necessary.

A reduction in the policy rates of the BSP is meant to encourage banks to reduce their lending rates as well. Lower interest rates are meant to encourage borrowings, which should support consumption and investments.

Lower interest rates, however, have a tendency to accelerate inflation. Monetary officials said this was all right for as long as the increase in consumer prices would stay within official targets.