Philippine Inflation Eased to 6-Month Low in November

By Francisco Alcuaz Jr.

Dec. 5 (Bloomberg) -- Philippine inflation slowed to a six- month low in November as food and fuel prices eased, giving the central bank room to cut interest rates to boost economic growth.

Consumer prices climbed 9.9 percent from a year earlier, after rising 11.2 percent in October, the National Statistics Office said today in Manila. That compared with the 10.3 percent median estimate of 13 economists in a Bloomberg News survey.

“The November inflation rate is indeed a pleasant surprise as it provides greater monetary policy space,” central bank Governor Amando Tetangco said in a mobile-phone text message. “That should encourage lower market rates and boost economic activity by the private sector.”

Bangko Sentral ng Pilipinas has kept its key rate unchanged since August, diverging from policy makers in Asia, Europe and the U.S., as economic growth accelerated in the third quarter and inflation remained elevated with a weaker peso boosting import costs. Still, lower rates may be needed as the global recession damps demand for Philippine goods and workers.

“It doesn’t look like inflation is an issue going forward and growth momentum, though better than expected in the third quarter, is expected to decelerate,” said Song Seng Wun, an economist at CIMB-GK Securities Ltd. in Singapore. “It’s really up to the central bank whether they heed those numbers and stay ahead of the curve with looser monetary policy.”

Core inflation, which excludes food and energy, accelerated to 7.9 percent last month from 7.8 percent in October, the statistics agency said.

‘Capital Flight’

The peso rose 0.3 percent to 49.25 per dollar as of 9:33 a.m. in Manila, according to Tullett Prebon Plc. The currency has dropped more than 16 percent this year, following three years of gains, as the global recession prompts investors to sell riskier assets in favor of U.S. Treasuries and other perceived safe havens.

The peso’s decline “may tilt the actual inflation rate upward,” Tetangco said Nov. 27. Cutting interest rates may “result in capital flight that will weaken the peso,” Deputy Governor Diwa Guinigundo said Nov. 7.

Food, beverage and tobacco prices rose 13.8 percent in November, the slowest pace since May, compared with a 15 percent gain in October, according to today’s report. The items account for about half of the consumer-price index.

Fuel, electricity and water inflation decelerated to 7.5 percent compared with 10.7 percent in October. Services costs climbed 7.5 percent compared with 10.2 percent.

To contact the reporter for this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net