Inflation to breach BSP target in parts of 2011

Inflation in the next few months could breach the Bangko Sentral ng Pilipinas’ (BSP) inflation target for 2011 due to escalating oil and food prices in the world market, BSP governor Amando Tetangco said Tuesday. The BSP has set a 3-percent to 5-percent inflation target for 2011. "There would be months wherein inflation could exceed 5 percent," said Tetangco, adding that the BSP expects inflation to taper off toward the end of the year. He said the BSP sees the country ending the year with an inflation rate “close to the higher end" of the 3-percent to 5-percent range. In the first two months of the year, inflation averaged 3.9 percent after it kicked up to a nine-month high of 4.3 percent in February. http://www.gmanews.tv/story/214503/bsp-february-inflation-quickens-to-9-mo-high In the same period in 2011, inflation ended at an average of 4.2 percent. Inflation, interest rates Prompted by the build-up in inflation pressures, the BSP Monetary Board raised its key interest rates by 25 basis points as a pre-emptive move on Thursday. The central bank kept its benchmark rates at record lows since July 2009. The move brought the overnight borrowing rates to 4.25 percent from 4percent, and the overnight lending rate to 6.25 percent from 6 percent. Between December 2008 and July 2009, the BSP slashed its key rates by 200 basis points to cushion the impact of the global financial crisis on the Philippine economy. Before the tightening, the Philippines remained the only major economy in the Asia-Pacific region that had not raised interest rates since the global economic meltdown ended. Tetangco noted that the latest forecasts from Asia-Pacific economists show that the average inflation this year will still fall within the BSP’s 3-percent to 5-percent target. "But we need to make sure that the inflation expectation remains well anchored and make sure that any possible round effects will be dealt with at an early stage… So as a preemptive move we decided to raise interest rates," he said. Tetangco said monetary authorities will keep an eye on the impact of the tensions in the Middle East and North Africa and the disaster in Japan on the Philippine inflation and economic growth. – PE/VS, GMA News