July annual inflation at 6-month high

Reuters

Posted at Aug 08 2012 09:19 AM | Updated as of Aug 09 2012 01:08 AM

MANILA (UPDATE) - Philippine annual inflation increased in July to its highest in six months, and analysts expect the central bank to hold off on cutting interest rates when it next meets in September, with prices likely to stay high due to weather-related supply shocks.

The central bank governor said, however, that inflation was expected to remain at manageable levels, and analysts still saw room for a fourth interest rate cut sometime this year.

The consumer price index in July rose 3.2 percent from a year earlier, the statistics office said, faster than market estimates and picking up from 2.8 percent in June.

The median forecast from a Reuters poll of 12 economists was for annual inflation to hit 3.0 percent in July. The central bank had forecast 2.6 to 3.5 percent inflation in the month.   

The index rose 0.3 percent in July from the previous month, slower than market forecast.

Core inflation, which strips out some of the more volatile components, picked up pace to 4.1 percent from a year earlier after the previous month's 3.7 percent.

"This bears watching to see the duration and extent of the up move. The overall assessment of manageable inflation remains," Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco told reporters in a mobile text message.

Inflation averaged 3.1 percent in the seven months to July, near the low end of the central bank's 3 to 5 inflation target this year.

"The recent weather tragedy has inflicted significant damage to infrastructure and farming output. While the actual damage is yet not determined, short-term supply shocks are anticipated and likely to fuel inflationary pressures," said Trinh Nguyen, economist at HSBC in Hong Kong. 

Several dozen people were killed in severe floods and landslides that hit northern Philippines in recent days, and on Tuesday, the capital Manila was shuttered with public and private offices and schools closed due to torrential monsoon rains and massive flooding that inundated half of the capital.