(STAR) By Des Ferriols - The nationwide inflation rate rose at a slower pace of 2.4 percent in August from 2.6 percent the previous month, with the government on track to meet its inflation targets, the National Statistics Office (NSO) reported yesterday.

The lower inflation rate was due to the slower annual price hikes of all the commodity groups, except for clothing, the NSO said.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said with the benign figure in August, the Philippines was on track to meet its target of containing inflation to between four and five percent for the whole year.

Government, however, would remain vigilant on “risks to guide our conduct of monetary policy going forward,” Tetangco said.

“Our neutral monetary policy is bolstered by moderating risks from liquidity growth and adverse weather conditions,” he added.

The NSO said inflation for food alone slid to 2.5 percent from 2.8 percent in July. Inflation for fuel, light and water group slowed to 5.1 percent from 5.3 percent.

The low inflation figure was announced just days after government boasted the economy had expanded 7.5 percent year-on-year in the second quarter, the fastest growth clip in two decades.

President Arroyo on Tuesday said subprime woes that have wreaked havoc in world markets would likely not affect Philippine growth.

According to Tetangco, the steadiness of domestic prices bolstered the BSP’s current monetary policy settings that he characterized as “neutral”.

“That stance is further supported by moderating risks from liquidity growth and adverse weather conditions,” Tetangco said, indicating that the Monetary Board (MB) was more comfortable as monthly liquidity growth dropped below 20 percent.

The NSO said prices eased across the National Capital Region (NCR) where the inflation rate was recorded at 2.6 percent from 2.7 percent in July mainly because price increases slowed down in the food, beverages and tobacco (FBT) group, housing and repairs (H&R) items and services items.

On the other hand, the inflation rate in Areas Outside the National Capital Region (AONCR) also improved to 2.2 percent in August from 2.5 percent in July. Except for clothing, lower annual rates of price additions were posted in all the commodity groups.

The BSP however said it expected the national average inflation rate is expected to accelerate towards the end of the year.

The BSP projected that the national inflation rate would average between 2.6 percent and 3.1 percent this year, significantly lower than the target inflation rate of four percent to five percent.

BSP Deputy Governor Diwa Guinigundo told reporters that although the year-to-date average was only 2.6 percent, there indications of an uptick in the coming months.

“There is a tendency for the rest of the year for the inflation rate to slightly go up, in line with the base effects,” Guinigundo said.

Aside from the usual inflationary pressure towards the holidays, Guinigundo said there were also other pressures that could impact on the prices of basic commodities.

“We will have to also contend with the impact of the prolonged dry spell and the increase in oil prices,” Guinigundo said.” We had to factor that as well.”

Despite these effects, however, Guinigundo said that the uptick in the inflation rate would still put the national full-year average within the inflation forecast. — With AFP

Chief News Editor: Sol Jose Vanzi

All rights reserved