AMANDO TETANGCO: Inflation should remain manageable. PHOTO FROM BSP.GOV.PH
The annual inflation rate edged up slightly in September, matching market forecasts, but economists said there was little doubt the central bank would keep interest rates steady at a review this month as it focuses on supporting growth.
After two typhoons hit the country last week and damaged crops, there have been concerns food prices would rise. But Governor Amando Tetangco of the Bangko Sentral ng Pilipinas said he did not expect a persistent impact, saying inflation should remain manageable.
Annual headline inflation in September was 4.8 percent, slightly higher than the previous month’s 4.7 percent, based on a new series using 2006 prices.
“The headline number is pretty much expected and it is good for policymakers. The central bank can now afford to focus its efforts on stimulating the economy by keeping the overnight borrowing rate low,” said Eugene Leow, an economist at DBS in Singapore.
The old series based on 2000 prices showed annual inflation at 4.6 percent, picking up from August’s 4.3 percent. The central bank is using this series to measure its 2011 target of keeping inflation between 3 and 5 percent, and the nine-month average of 4.3 percent suggested it would comfortably meet that.
The central bank is widely expected to keep interest rates steady at 4.5 percent for the fourth meeting in a row on October 20.
Tetangco also said the central bank was watching the developments abroad as doubts grew about whether a planned second bailout package for debt-laden Greece would go ahead.
“We also are watchful of policy developments to resolve the European debt crisis as these could impact on risk appetite and therefore capital flows in emerging market economies, including the Philippines,” he said in a text message to reporters.
Philippine economic growth slowed more than expected in the second quarter, helping keep inflation tame, and authorities have promised to ramp up spending in the remainder of the year to rev up activity.
“Rates will likely remain on hold this year and well into first half 2012 before the bias possibly shifts to an accommodative gear if growth risks heighten,” said Radhika Rao, an economist at Forecast Pte in Singapore.
Many central banks in Asia have put monetary tightening on hold and there were some signs that the policy focus could be shifting toward supporting growth amid increasing global economic uncertainties.—Reuters