Tetangco offers 2.0-2.9% forecast for November

Inflation to keep falling -- BSP

INFLATION WILL LIKELY continue to fall this month with a strong peso offsetting higher food and utility prices, the Bangko Sentral ng Pilipinas (BSP) said.

"Inflation for November will likely be [within a range of] 2.0 to 2.9[%,]" central bank Governor Amando M. Tetangco, Jr. told reporters last Friday evening.

Analysts said the BSP outlook indicated that monetary authorities would keep policy rates unchanged well into the first half of 2011.

Mr. Tetangco issued the forecast -- the low end of which would be the lowest rate since October 2009’s 1.6% -- ahead of the Dec. 7 release of official November data.

The annual inflation rate last month was 2.8%, down from the previous month’s 3.5%.

Inflation has so far averaged 4%, within the BSP’s target range of 3.5-5.5% for 2010.

The central bank expects inflation to hit 3.6% this year.

"A mix of increases in utilities and certain food items could have been offset by peso strength and lower rice prices due to increased palay production," Mr. Tetangco said in a text message to reporters.

"Inflation over the policy horizon is expected to be manageable and closer to the lower end of the target range."

The central bank, said Mr. Tetangco, will continue to be watchful.

"We will continue to monitor developments to ensure that our policy stance remains appropriate," he said.

The Monetary Board kept key rates unchanged at its last policy meeting on Nov. 18. The BSP’s overnight borrowing and lending rates have been kept at 4% and 6%, respectively, since July last year.

The board will hold its last policy meeting for the year on December 30.

University of Asia and the Pacific economist Victor A. Abola said in a telephone interview yesterday that he expected rates to stay unchanged for the rest of the year.

"There is not much threat to inflation. The earliest they (the BSP) would raise it is by the second quarter of next year," he said.

The view was shared by Benjamin E. Diokno, an economist at the University of the Philippines.

"I think what is important is the full-year inflation. I think it will be closer to the lower end of the target for the year," he said.

"The economy is still very weak so I expect the BSP to keep rates steady," Mr. Diokno said.

The Philippines is one of the few Asian countries not to have raised rates since the global financial crisis. -- Louella D. Desiderio with a report from Reuters