Expects to meet 2009 inflation target with August figure

MANILA - The Bangko Sentral ng Pilipinas' (BSP) monetary policy remains appropriate given a manageable inflation outlook, Governor Amando Tetangco said on Friday.

Philippine consumer prices rose at their slowest pace in 22 years in August, data from the National Statistics Office showed. The annual inflation rate for August eased to 0.1% from July's 0.2%, below market estimates.

Tetangco said the August inflation figure is still within their forecast range, adding that the average 2009 inflation would likely come in below the mid-point of the BSP's 2.5% to 4.5% target.

"The August inflation figure of 0.1 percent is within our forecast range and boosts our expectation that full year 2009 inflation would be within but below the mid of our 2009 target of 2.5-4.5 percent," Tetangco said in a message.

As the inflation outlook continues to be manageable, Tetangco said monetary settings remain "appropriate at this time."

"Nevertheless, we will be watchful of local and global developments and effects that had not been earlier factored into our models and assessments. We will then make adjustments to our monetary policy stance as and when necessary," he said.

Last month, the BSP ended an 8-month easing cycle and kept the key overnight borrowing rate on hold at a record low of 4%. Analysts said this rate is likely to be maintained until the end of the year.

The BSP said after last week's stronger-than-expected second quarter economic growth data that its decision to pause in the series of rate cuts was correct. On Tuesday, Tetangco said any possible shift in monetary policy would be gradual.

For the 3 months ending June, the country's gross domestic product reached 1.5% from the revised 0.6% in the previous quarter.