Philippine Sept inflation hits record low, rates seen steady this year

[MANILA] Philippine annual inflation slowed for a seventh consecutive month in September, taking it to a record low and bolstering views interest rates will be left unchanged the rest of the year.

The consumer price index rose 0.4 per cent in September, below the 0.6 per cent median in a Reuters poll but within the central bank's 0.2-1.0 per cent forecast for the month.

Inflation slowed due to lower utility, transport and fuel costs. Core inflation, which takes out volatile items in the consumer basket and measures the underlying trend in prices, also slowed to a record low of 1.4 per cent in September.

The September print brought the nine-month average inflation rate to 1.6 per cent, below the central bank's 2-4 per cent target for 2015 and 2016.

The Bangko Sentral ng Pilipinas (BSP) has kept its key overnight borrowing rate at 4.0 per cent since October, and Governor Amando Tetangco said last week it can stay that way for the rest of 2015 given benign inflation and strong economic growth.

The central bank expects inflation to move closer to its target next year due to the impact of a stronger and protracted El Nino on rice prices.

Emilio Neri, economist at Bank of the Philippine Islands, said September's slower-than-expected inflation will likely push an interest rate hike further into 2016.

Earlier, a hike in the second quarter looked "compelling"because of higher inflation, "but because we are coming from a very low starting point, it's probably going to be delayed," he said.

Annual economic growth in the Philippines rebounded to 5.6 per cent in the second quarter from 5.0 per cent in the first, but the country will miss this year's 7-8 per cent target.

Economic planning chief Arsenio Balisacan has said a more realistic growth target this year would be between 6-6.5 per cent, which would still make the Philippines one of the few bright spots in Asia.

The World Bank on Monday lowered its 2015 Philippine growth forecast to 5.8 per cent from 6.5 per cent, and to 6.4 per cent next year instead of 6.5 per cent.

REUTERS