Inflation Continues To Decline In Philippine And Indonesia's Central Bank Cut Interest Rates To 6.50%

Daily Forex Fundamentals | Written by ecPulse.com | Aug 05 09 07:09 GMT |

Philippine sees a continued decline in inflation, which is determining the central bank to maintain their interest rates at a record low trying to support the economic growth of the country. Prices have reached to the lowest in 22 years as commodities and row materials prices are still declining around the world. The consumer price index rose in July by 0.3% and less than the previous reading, which indicated an increase by 0.6%, while it was expected to rise by 0.5%, as for the annual reading it rose by 0.2% being lower than the previous reading of 1.5% after it was expected to rise by 0.4%. Inflation rates in the Philippines persist on declining amid a continuing fall in the costs of various sectors like the service sector and the utilities sector, giving the possibility for the Philippine central bank to lower interest rates or maintain them at their lowest levels of 4.00%. The Philippine central bank has already cut interest rates six times in seven months, in order to support domestic spending and to address the significant decline in economic growth, which has been evident during the first quarter when it recorded a growth rate of only 0.4%. The Central Bank announced that it is going to watch closely the developments seen by prices and the risks that could affect them; but since global demand is stabilizing, it is expected that prices will start picking up according to the theory of supply and demand. But the real problem faced by Philippine is now the problem of financing, where the government is unable to finance its debt which is limiting the government spending needed to support economic growth, and this determined it to ask help from the Asian Development Bank in order to obtain a loan worth 500 million dollars this month. Moving to Indonesia, where the central bank cut the interest rates by 25 basis points to 6.50% from 6.75% in line with expectations and for the ninth consecutive time after it reached to 9.5% in December. Asian central banks have stopped reducing interest rates after the recent stability seen in the global financial markets. Based on this the decision taken by the Indonesian central bank today may be the last of its kind, especially since the risks of inflation had began appearing in the horizon while the economy managed to witness a growth rate during the first quarter of the year by 4.4%, as the sharp cut in interest rates managed to support domestic consumption and offset the impact of the fall in global demand. Ecpulse disclaimer: The content of ecPulse.com and any page in the website contain information for investors/traders and is not a recommendation to buy or sell currencies, stocks, gold, silver & energies, nor an offer to buy or sell currencies, stocks, gold, silver & energies. The information provided reflects the writers' opinions that deemed reliable but is not guaranteed as to accuracy or completeness. ecPulse is not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trades currencies, stocks, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, stocks gold, silver &energies presented should be considered speculative with a high degree of volatility and risk