Surging food and energy prices in the Philippines pushed the inflation rate in April to 8.3 percent, the highest level in three years, the government said on Tuesday.
The National Statistics Office said "all the commodity groups at the national level continued to record higher annual price increases," with the food sector alone incurring a 12 percent inflation rate.
The April 2008 figure was the highest inflation rate recorded since May 2005 when inflation hit 8.5 percent, it said in a statement.
April's rate far exceeded central bank forecasts of between 6.4 and 7.0 percent and economists' previous estimates of about 6.8 percent.
Inflation rose 6.4 percent in March.
The April figure brought the average inflation for the first four months of 2008 to 6.2 percent, far above the central bank's full-year target range of between 3.0 and 5.0 percent.
Rice, the national staple saw a 24.6-percent price rise in April with corn, other cereals and dairy products also incurring double-digit rates.
Excluding selected food and energy items, core inflation rose to 5.9 percent in April compared to 4.8 percent in March.
The Philippines, one of the world's largest rice importers, has been hit hard by worldwide rise in the price of rice.
The government has been planning to import up to 2.7 million tonnes of rice this year but on Monday, it rejected an offer for 675,000 tonnes from Vietnam.
"The central bank will be obliged to hike interest rates by the second half to head off second-round inflation that may come from wages,'' said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
Interest rates at a 16-year low and the fastest growth in three decades are fueling demand and adding to price pressures from soaring commodity costs. The central bank, which cut rates five times between July and January, will act decisively on inflation expectations, Governor Amando Tetangco said today.
Last month's inflation rate was more than the 6.4 percent to 7 percent forecast by Tetangco on April 30 and exceeded the highest estimate of 7.8 percent among economists surveyed. Philippine debt, stocks and the peso fell.
Ten-year government bond yields surged 77 basis points to 9.19 percent, a level last seen in August 2006, according to the Philippine Dealing & Exchange Corp.
In Shock
"The market is in shock,'' said Yvette Marquez, who helps manage 290 billion pesos ($6.9 billion) at BPI Asset Management in Manila. "This is not the worst inflation can go."
Bangko Sentral ng Pilipinas policy-makers, who kept the benchmark interest rate unchanged at 5 percent on April 24, may raise borrowing costs as early as their next meeting on June 5, according to HSBC Holdings Plc. The central bank hasn't increased its key rate since October 2005.
"The magnitude was higher than expected,'' Tetangco said in a mobile-phone text message today from Madrid, where he is attending the annual Asian Development Bank meeting. "The elevated prices of oil and non-oil goods continue to pose challenges for policy makers.''
"Still, higher production should eventually temper price increases in some commodities, returning price movements to manageable levels,'' he said.
"We will, however, continue to closely monitor developments for any second-round pricing pressures and will act decisively to ensure that inflation expectations would remain well anchored,'' Tetangco said.
Food, Fuel
Food, beverage and tobacco prices surged 11.4 percent last month after gaining 8.2 percent in March. Fuel, electricity and water inflation accelerated to 8 percent from 6.2 percent. Services costs climbed 6.9 percent, up from 6.4 percent. Food prices account for half of the price index.
The central bank's targeted inflation rate of 3 percent to 5 percent this year is at risk from rising energy and commodity costs, and prices may be further aggravated by higher wages and transport fares, Tetangco said earlier.
"We will not hesitate to make any necessary refinements to the current stance of monetary policy once we perceive any changes,'' he said in a May 4 e-mail.
President Gloria Arroyo has told wage-setting boards to adjust pay levels to help workers cope with rising prices.
Local retail prices of rice, the nation's staple food, have climbed almost 19 percent in the past month and 35 percent from a year ago, according to Bureau of Agricultural Statistics data. The cost of meat, poultry, fish and vegetables has also risen.
Gasoline Prices
Prices of diesel and gasoline rose one peso a liter on May 3, the ninth increase this year. Manila Electric Co., the nation's biggest power retailer, passed on higher costs to consumers last month.
"I think inflation has peaked and so the central bank should hold off unless there's evidence of second-round effects,'' said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. "Consumers are already squeezed by high prices and raising rates would make it worse.'"
The National Statistics Office said "all the commodity groups at the national level continued to record higher annual price increases," with the food sector alone incurring a 12 percent inflation rate.
The April 2008 figure was the highest inflation rate recorded since May 2005 when inflation hit 8.5 percent, it said in a statement.
April's rate far exceeded central bank forecasts of between 6.4 and 7.0 percent and economists' previous estimates of about 6.8 percent.
Inflation rose 6.4 percent in March.
The April figure brought the average inflation for the first four months of 2008 to 6.2 percent, far above the central bank's full-year target range of between 3.0 and 5.0 percent.
Rice, the national staple saw a 24.6-percent price rise in April with corn, other cereals and dairy products also incurring double-digit rates.
Excluding selected food and energy items, core inflation rose to 5.9 percent in April compared to 4.8 percent in March.
The Philippines, one of the world's largest rice importers, has been hit hard by worldwide rise in the price of rice.
The government has been planning to import up to 2.7 million tonnes of rice this year but on Monday, it rejected an offer for 675,000 tonnes from Vietnam.
"The central bank will be obliged to hike interest rates by the second half to head off second-round inflation that may come from wages,'' said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
Interest rates at a 16-year low and the fastest growth in three decades are fueling demand and adding to price pressures from soaring commodity costs. The central bank, which cut rates five times between July and January, will act decisively on inflation expectations, Governor Amando Tetangco said today.
Last month's inflation rate was more than the 6.4 percent to 7 percent forecast by Tetangco on April 30 and exceeded the highest estimate of 7.8 percent among economists surveyed. Philippine debt, stocks and the peso fell.
Ten-year government bond yields surged 77 basis points to 9.19 percent, a level last seen in August 2006, according to the Philippine Dealing & Exchange Corp.
In Shock
"The market is in shock,'' said Yvette Marquez, who helps manage 290 billion pesos ($6.9 billion) at BPI Asset Management in Manila. "This is not the worst inflation can go."
Bangko Sentral ng Pilipinas policy-makers, who kept the benchmark interest rate unchanged at 5 percent on April 24, may raise borrowing costs as early as their next meeting on June 5, according to HSBC Holdings Plc. The central bank hasn't increased its key rate since October 2005.
"The magnitude was higher than expected,'' Tetangco said in a mobile-phone text message today from Madrid, where he is attending the annual Asian Development Bank meeting. "The elevated prices of oil and non-oil goods continue to pose challenges for policy makers.''
"Still, higher production should eventually temper price increases in some commodities, returning price movements to manageable levels,'' he said.
"We will, however, continue to closely monitor developments for any second-round pricing pressures and will act decisively to ensure that inflation expectations would remain well anchored,'' Tetangco said.
Food, Fuel
Food, beverage and tobacco prices surged 11.4 percent last month after gaining 8.2 percent in March. Fuel, electricity and water inflation accelerated to 8 percent from 6.2 percent. Services costs climbed 6.9 percent, up from 6.4 percent. Food prices account for half of the price index.
The central bank's targeted inflation rate of 3 percent to 5 percent this year is at risk from rising energy and commodity costs, and prices may be further aggravated by higher wages and transport fares, Tetangco said earlier.
"We will not hesitate to make any necessary refinements to the current stance of monetary policy once we perceive any changes,'' he said in a May 4 e-mail.
President Gloria Arroyo has told wage-setting boards to adjust pay levels to help workers cope with rising prices.
Local retail prices of rice, the nation's staple food, have climbed almost 19 percent in the past month and 35 percent from a year ago, according to Bureau of Agricultural Statistics data. The cost of meat, poultry, fish and vegetables has also risen.
Gasoline Prices
Prices of diesel and gasoline rose one peso a liter on May 3, the ninth increase this year. Manila Electric Co., the nation's biggest power retailer, passed on higher costs to consumers last month.
"I think inflation has peaked and so the central bank should hold off unless there's evidence of second-round effects,'' said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. "Consumers are already squeezed by high prices and raising rates would make it worse.'"
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