Philippine Inflation Rate Declines to 9-Month Low

By Francisco Alcuaz Jr.

Jan. 6 (Bloomberg) -- Philippine inflation eased to the slowest pace in nine months in December, prompting the central bank to say it will consider further interest-rate cuts.

Consumer prices rose 8 percent from a year earlier, the National Statistics Office said today in Manila. That compares with the 8.8 percent median estimate of nine economists in a Bloomberg News survey. Prices rose 9.9 percent in November.

Slowing inflation across Asia has allowed central banks to cut borrowing costs to spur growth as export demand falls. The Philippine central bank lowered its benchmark interest rate for the first time in 11 months in December to 5.5 percent.

“As inflation risks, particularly from food and fuel prices, continue to recede, we will carefully consider opportunities for monetary easing, mindful of potential tightening financial conditions,” Bangko Sentral ng Pilipinas Governor Amando Tetangco said in a mobile-phone text message today.

Indonesia yesterday said inflation slowed to 11.1 percent in December, a six-month low, and Thailand said consumer-price gains eased to 0.4 percent.

Cooling prices may also buoy consumer spending, said Jonathan Ravelas, market strategist at Banco de Oro Unibank Inc. in Manila. That could help support sales at SM Prime Holdings Inc. shopping malls, Jollibee Foods Corp. outlets and other retailers.

“The threat of inflation has been extinguished or taken a back seat,” Ravelas said. Slowing inflation “restores Philippine consumer power, which will help cushion the effects of the recession.”

Crude Oil

Inflation surged to a 16-year high of 12.5 percent in August after oil rose to a record $147.27 a barrel in July. Crude oil futures have fallen since then as the global recession damped demand, pushing prices down 54 percent last year, the first annual drop since 2001. The Philippines imports almost all its crude.

The cost of fuel, electricity and water fell 1.7 percent in December from a year earlier, today’s report showed. Prices of services, food and beverages rose at a slower pace.

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