Philippine inflation hits 14-year high in June

Rising food and energy prices in the Philippines pushed its June inflation rate to 11.4 percent, the highest level in 14 years, the government said Friday.

The upturn exceeded the forecasts of both the central bank and many private analysts who had expected inflation to range from 10.4 to 11.2 percent.

This was also the highest rate since May 1994 when inflation hit 11.5 percent, the National Statistics Office said in a statement.

Central bank governor Amando Tetangco signalled the monetary authority's plan to tighten monetary policy.

"While inflation continues to be influenced by supply-side pressures, there are indications that such pressures have started to feed into demand, with core inflation steadily rising since December 2007," Tetangco said in a statement.

"Monetary authorities have acted last month to address risks to inflation and they stand ready to adjust monetary policy settings further as and when necessary to achieve the price stability objective," he added.

The central bank began tightening its key interest rates last month, for the first time since 2005, after the May inflation figure spiked at a readjusted rate of 9.5 percent.

The overnight borrowing rate rose to 5.25 percent while the overnight lending rate was increased to 7.25 percent, both by 25 basis points.

The government said Friday that the upsurge in inflation was due to "soaring prices of rice nationwide along with the upward adjustments of other food items such as flour and flour products, fruits and vegetables and meat in selected regions.

"Tuition fee hikes and the series of upward adjustments in petroleum products also contributed to the uptrend," the statement said.

The school season began last month.

Economic Planning Secretary Augusto Santos said cereals prices surged 42.2 from a year earlier, with fuel prices up 22.0 percent while transportation and communication jumped 12.4 percent.

Excluding selected food and energy items, core inflation rose to 6.6 percent in June from 6.2 percent in May, the office said.

The June figure brings inflation in the first half of the year to 7.6 percent.

The central bank originally forecast inflation for the whole year at 3.0 to 5.0 percent.

"The current inflation is consistent with the (central bank) outlook that inflation will reach double-digits beginning in June this year," Tetangco said.

"The inflation path is expected to peak in the third quarter of 2008 and decline thereafter toward single-digit levels in 2009, as price increases in food and oil may not be sustainable."

The Philippines is one of the world's biggest rice importers and has been hit hard by a worldwide rise in prices.

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