Tuesday July 7, 02:50 AM
INSTANT VIEW 1-Philippine June inflation lowest in over 20 years
MANILA, July 7 (Reuters) - Philippine consumer prices rose at their slowest pace in more than two decades in June, giving the central bank more leeway to cut its policy rate to a record low of 4.0 percent this week to spur economic growth
The annual inflation rate in June eased to 1.5 percent, in line with market estimates, from 3.3 percent in May, the statistics office said on Tuesday.
The previous low was in April 1987, when the consumer price index (CPI (NYSE: CPY - news) ) rose just 1.0 percent from the previous year.
A Reuters poll of 10 economists last week had forecast June CPI at 1.6 percent, within the central bank's estimate of 1.2-2.1 percent.
The core inflation rate, which strips out some volatile food and energy items, eased to an annual 3.9 percent in June from 4.4 percent in May.
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KEY POINTS:
June May
(year on year)
Headline Core Headline Core
Inflation 1.5 3.9 3.3 4.4
(Note (Stockholm: NOTE.ST - news) : The base year is 2000. Core (Berlin: LJ1.BE - news) inflation strips out some food and fuel items)
Month-on-month inflation was 0.6 percent in June against -0.1 percent in May.
*Price changes for key items in June from a year earlier:
- Fuel, light and water: -5.4 percent (May: -4.9 percent)
- Food, beverages and tobacco: 3.1 percent (May: 5.9 percent). Food prices alone grew an annual 3.0 percent in June from 6.0 percent in May. Rice prices climbed an annual -0.6 percent in June from 8.4 percent in May.
- Services: -1.1 percent (May: +0.4 percent)
MARKET REACTION:
- The peso firmed to 48.20 to the dollar in early trade from its close of 48.25 on Monday.
- The Philippine stock market was not yet open when the data were released.
LINKS:
- For more data, visit the National Statistics Office Web site: http://www.census.gov.ph
BACKGROUND:
- With inflation continuing to ease, analysts expect the central bank to cut its key interest rate by 25 basis points to a record low of 4 percent on Thursday to spur growth, before pausing to weigh the impact of rate cuts on the economy.
- Annual headline inflation has been decelerating since peaking at 12.4 percent in August, a 17-year high, largely due to declines in global commodity prices.
- The central bank expects the inflation rate to bottom in the third quarter at around 1 percent and pick up in the following months to reach an average 3.4 percent by the end of the year, within the government's official target of 2.5-4.5 percent.
- The central bank has cut its overnight rates by a total 1.75 percentage points since December 2008 to help avert a sharp economic slowdown.
- The government has lowered its economic growth forecast this year to 0.8-1.8 percent from 3.1-4.1 percent after disappointing first quarter growth.
(Reporting by Manolo Serapio Jr. and Karen Lema; Editing by Rosemarie Francisco & Kim Coghill)
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