CONSUMER PRICES ROSE TO 7.2% IN SEPTEMBER PUSHING INFLATION RATES UP
MANILA, October 6, 2004 (STAR) By Rica D. Delfinado - Consumer prices rose 7.2 percent in September, pushing the inflation rate above the government target for the year as prices of basic goods and services went up across the board due to supply shorfall and the continued increase in global oil prices, the National Statistics Office (NSO) reported yesterday.
The September inflation rate, 0.4 percentage points above August, pushed the annualized figure to 5.2 percent, higher than the government’s full-year target of four to five percent.
The figures are based on the 2000 price series.
The Bangko Sentral ng Pilipinas (BSP) said rising oil prices coupled with supply shortfall on key food products were the reason for the latest increase in the September inflation rate.
Analysts said the latest increase in consumer prices sparked concerns the BSP may have to raise interest rates just when the country needs all the help it can get to keep the economy growing.
But BSP Assistant Governor Diwa Gunigundo said the Monetary Board will look first for the demand pressure and pressure on inflation before it decides to raise interest rates.
"The central bank may look at that option after the November US presidential election," said Jonathan Ravelas of Banco De Oro.
"But our regulators would certainly wait for another adjustment in US rates before making a decision," he added.
Using prices with 1994 as a base, inflation rose 6.9 percent year-on-year in September, its fastest rate in five years as the country, already facing what President Arroyo has recognized as a fiscal crisis, paid the penalty on high oil prices.
Ravelas predicted further sharp increases in the months ahead amid pressure from historically high prices for crude oil imports.
"We’ve only just begun. We are certainly up for further record numbers especially with the Christmas season coming," Ravelas said.
Shares were weaker yesterday, a day after market hit a 55-month high, after the inflation figures raised concerns over higher interest rates.
"If inflation breaches the seven percent level (using the 1994 base year), that could trigger the central bank to finally increase rates," said Jose Vistan of AB Capital Securities.
At its last meeting on September 23, the central bank’s monetary board kept key interest rates unchanged at their lowest levels in 12 years, despite a quarter percentage point increase in the US federal funds rate.
The overnight rates have been kept steady for over a year now at 6.75 percent for borrowing and 9.00 percent for lending.
The central bank already expects inflation to exceed the government’s targets for this year and 2005 due to supply-side pressures – which it said cannot be addressed properly through monetary action – rather than demand.
The International Monetary Fund said in a recent country report that "there was a case for monetary tightening given that world interest rates (are) rising."
It said that new tax measures and higher electricity rates proposed by President Arroyo to trim the budget deficit "would exert further upward pressure on inflation." – Ted Torres, AFP
Reported by: Sol Jose Vanzi
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