Tuesday July 7, 03:04 AM
INSTANT VIEW 2-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.
***************************************************************
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)
COMMENTARY:
EUBEN PARACUELLES, ECONOMIST, ROYAL BANK OF SCOTLAND (LSE: RBS.L - news)
'It is broadly in line with what I was expecting.
'The 25 basis point cut that I expect this week will be
supported by that, so it would be interesting what the central
bank will say after the meeting, if they will give signals as to
how much lower they will go with their policy rate cuts, which I
suspect is not much more.
'Oil prices have been elevated and the headline numbers tend
to be more sensitive, and there is the risk of El Nino in the
second half, so food prices might climb. This is why we have to
wait for what the central bank might say after the meeting
because these risks are there.'
MARKET REACTION:
- The peso firmed to 48.22 to the dollar in early
trade from its close of 48.25 on Monday.
- The Philippine stock market's main index edged up
0.12 percent in early trade.
LINKS:
- For a graph on inflation, interest rates and the peso,
click on: http://graphics.thomsonreuters.com/079/PH_INF0709.jpg
- 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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