...says price pressures have moderated
MANILA, Philippines - Inflation likely stayed at a two-year high in July although inflationary pressures have moderated and the strong peso may have helped mitigate the impact of higher food and fuel prices, the central bank said on Monday.
However, risks remain from volatile commodity prices and a possible increase in foreign exchange inflows that could boost domestic liquidity as funds seek better returns in emerging markets, Governor Amando Tetangco said.
Annual inflation in July may range between 4.3% and 5.2%, said Tetangco. An inflation rate above 5 percent would be the highest since March 2009 when the rate was 6.4%, based on the old data base using 2000 prices.
"Downward adjustments in utility charges and the peso appreciation could offset higher average international crude prices and net increases in rice prices during the month," Tetangco said in a mobile text message to reporters.
"Although still elevated, inflation pressures seem to have moderated," Tetangco added.
The annual inflation rate was 4.6% in June, the highest since April 2009 under the old data series. Based on the new series using 2006 prices, inflation in June was 5.2%, also a two-year high.
The 2006 series will later become the standard for inflation reports.
The central bank kept policy rates steady at its June 16 meeting, but raised banks' required reserves to counter liquidity pressures, which it said could be fueled by expected inflows and the economy's strength.
Tetangco said the Bangko Sentral ng Pilipinas (BSP) was watching global developments and their impact on the local economy.
"There still remain risks particularly with respect to volatilities in international commodity prices and the impact of FX inflows on domestic liquidity," he said, adding the central bank would also monitor changes in global demand and shifts in investor sentiment toward emerging markets.
"We will take all these into consideration during our policy meeting this week to ensure that our policy settings remain appropriate."
The next policy review is on Thursday, a week before July inflation data is released on August 5.
Tetangco said on Thursday inflation this year could be lower than what the central bank had assumed at a policy review last month, and inflation pressures were not as strong as previously expected.