Optimism rises as RP inflation steadies

Optimism rises as RP inflation steadies

MANILA (AFP): The Philippine consumer price index was unchanged from the previous month at 5.7 percent in July, boosting government confidence that inflation could go down further as economic growth speeds up, officials said over the weekend.

The July figure brought the average inflation rate in the first seven months of the year to eight percent, the National Statistics Office said in a statement.

Month-on-month inflation hit 0.2 percent in July from a revised rate of 0.8 percent in June, the office added.

The Central Bank of the Philippines said the July rate was well within the 7.8-percent ceiling set under a prevailing standby program with the International Monetary Fund (IMF). It credited the steady inflation rate to stable food prices, remarking that the year-on-year consumer price index for food, beverages and tobacco, housing and repairs, clothing and miscellaneous items went down in July.

However the central bank admitted the rate for services and fuel, light and water went up.

The central bank said the stable inflation rate would increase flexibility in conducting monetary policy "to achieve the goal of reducing inflation while maintaining the broad stability of the peso."

Additionally, the decline in interest rates and the slowdown in inflation are expected to boost business confidence further, hopefully leading to more lending by the banking system, the central bank said.

Analysts said the inflation figures for July were within expectations.

"It wasn't disappointing (but) we were not (pleasantly) surprised with it," said April Lee of Citisecurities Inc. "As long as it is below six percent, it is okay," Lee said.

But she warned that recent widespread flooding in and around Metropolitan Manila could push up inflation in the coming months if it hurts agricultural production -- a major factor in the inflation rate.

Other analysts said the inflation rate may remain unchanged this month but could go up slightly in August if the floods hamper the distribution of agricultural products in the capital. However central bank governor Rafael Buenaventura said that despite the concerns over the floods, "I'm confident we can keep (within) our macroeconomic targets, including inflation."

Days of monsoon rains left widespread floods in Metropolitan Manila and nearby provinces although the water in many areas has since receded.

The year-on-year inflation rate for the highly-urbanized capital of Metropolitan Manila rose from 3.9 percent in June to 4.3 percent in July while the rate in the largely-rural areas outside the capital went down to 6.2 percent from 6.4 percent the previous month.