News Room - Business/Economics

Posted on 11 Aug 2008

Raw material prices to stay high: central bank (Philippines)

Non-oil commodity prices are expected to stay high and help push Philippine inflation above official targets for 2008 and 2009, the central bank said Friday. a€?Second-round effects have set in, as evident in the surge in core inflation, and a rise in inflation expectations has been perceptible from surveys ...a€? it said in a quarterly report. 

It said headline inflation rose to 9.7 percent in the three months to June compared to 5.6 percent in the first three months of the year.

Core inflation, which excludes specific food and energy items, picked up to 6.2 percent from 4.1 percent. a€?The latest assessment is that inflation could settle above the 2008 and 2009 targets,a€? the central bank said.

Last week central bank governor Amando Tetangco said average inflation for 2008 would be about 9.0-11.0 percent and 6.0-8.0 percent in 2009.

Inflation rose to 11.4 percent in June, the highest level in 14 years, due to rising food and energy prices. Over the past two months the central bank has raised its key interest rates by 75 basis points to try and dampen the price rises.

The central bank report said a€?the global non-oil commodity price hikes appear prolonged and are expected to take longer to unwind.a€?

But it said it expected oil prices to eventually soften as a global economic slowdown trims demand.