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By Chino S. Leyco Reporter
The worst is yet to come, as the
Bangko Sentral ng Pilipinas (BSP) predicted that consumer price
increases will peak in the coming two months before returning to the
single-digit level next year.
In a statement on Wednesday,
central bank Governor Amando Tetangco Jr. said inflation will start
easing only after the third quarter this year but that it will
likely return to single-digits in 2009.
Last month, the central bank
expected inflation to have risen to between 10.4 percent and 11.2
percent, the highest since May 1994. The official report on June
inflation is due out Friday.
Tetangco said the central bank is
ready to take “necessary action” to deal with rising prices.
The central bank last month hiked
key interest rates by 25 basis points—to 5.25 percent for the
overnight borrowing rate and to 7.25 percent for the overnight
lending rate.
Tetangco said, “The Monetary
Board believes that there are already indications that supply-driven
pressures are beginning to feed into demand.”
The central bank “remains
committed to pursuing the necessary monetary action to address the
risks to inflation and inflation expectations and ensure the
achievement of the central bank’s price stability objective,” he
added.
Inflation forecast
“For 2009, average inflation is
projected to decline to 4 percent to 6 percent,” Tetangco said.
The central bank expects consumer
price increases this year to average between 7 percent and 9
percent, which is significantly higher than its target of 3 percent
to 5 percent.
Market observers said the
third-quarter inflation will peak at above 11 percent year on year
in September, pushing up this year’s average rate to 9 percent.
In its Consumer Expectation
Survey, the central bank earlier said the overall consumer
confidence index dropped to minus 43.8 percent in the second
quarter, easing to minus 26.9 percent in the third quarter and to
minus 20.3 percent in the next 12 months.
“In the absence of persistent
sharp surges in oil prices, base effects should produce lower
inflation rates next year and beyond,” Tetangco said.
He also said favorable
projections for global and domestic agriculture output should help
to stabilize food prices, as the slowdown in global economy activity
is expected to contribute to moderating demand for oil, which should
enable an easing in imported commodity prices.
Oil prices jumped beyond $141 a
barrel on Tuesday after the president of the Organization of
Petroleum Exporting Countries (OPEC) said there was uncertainty
surrounding future investment in facilities to boost crude output.
The Philippines is set to remove
the tariff levied on imported oil to blunt the effects of soaring
world crude prices.
--WITH AFP
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