052907: Oil, food prices to push inflation

PHILIPPINE inflation may accelerate this month on higher oil and food prices, central bank Governor Amando Tetangco said Monday.                                                           “We expect some slight upward bias in inflation,” Tetangco said in a mobile phone message. “Overall, the inflation environment continues to be favorable.” The inflation rate this month may be between 2.1 percent and 2.8 percent from a year ago, Tetangco said in a mobile text message. The bottom end of the range would be the slowest pace in 20 years, while the top end would mark the second acceleration in prices in as many months.                                       Gains in the peso against the dollar have restrained inflation by holding down import costs, while “cautious monetary policy” has also curbed price increases, he said.                     Consumer prices rose 2.3 percent in April, the first acceleration in 12 months, increasing from a seven-year low of 2.2 percent in March.    Many in the Cabinet economic cluster anticipate the inflation rate to inch up over the short horizon, in part because the base effect of the higher value-added tax rate of 12 percent appeared to have already tapered off. But oil prices during the month have also been higher, according to Tetangco. “Supply conditions in some areas were a little less favorable because of the dry spell. They were, of course, cushioned by the strong peso, cheap imports and the generally cautious monetary policy,” he said. Still, he said the overall inflation environment “continues to be favorable” or one where the average for the year should fall within the 4-percent to 5- percent range forecast for the period. Such optimism, economists and observers noted, is a broad hint at the posture of the monetary board, the policymaking body of the BSP, when it meets on Thursday and decides what to do with its policy rates. Some said now was the time to make some adjustments to the rate at which the BSP borrows from or lends to the banks on overnight bases, currently set at 7.5 percent and 9.75 percent, respectively. The BSP has kept these rates unchanged since October 2005 even though it subsequently adopted a tiered interest rate approach to bank funds that are brought to it also for overnight safekeeping, effectively relaxing their monetary stance. --Bloomberg, J. Vallecera

 

http://www.businessmirror.com.ph/05292007/headlines05.html