MANILA – Philippine consumer prices rose at their slowest pace in more than two decades in June, giving the central bank more leeway to cut its policy rate to a record low of 4.0 percent this week to spur economic growth.

According to the National Statistics Office (NSO), last month’s inflation figure was down from 3.3 percent in May and well below the 4.8 percent recorded in April.

It was broadly in line with the central bank’s estimate of 1.2 to 2.1 percent as well as the 1.6 percent median forecast of economists polled by Reuters last week.

The NSO said inflation in June was the lowest since April 1987, when the consumer price index (CPI) rose just 1.0 percent year-on-year.

The office noted that all commodity groups posted slower increases in prices.

The inflation rate for food, beverages and tobacco items declined to 3.1 percent in June from 5.9 percent in May while the rates for clothing and other miscellaneous items slowed down from 2.6 to 2.5 percent, and 3.1 to 2.9 percent, respectively.

The fuel, light and water group contributed the most to the decline in the overall CPI with a contraction of 5.4 percent, much faster than the 4.9 percent in May.

The June inflation numbers give the Bangko Sentral ng Pilipinas (BSP) the flexibility to ease policy further, said central bank governor Amando Tetangco.

"This confirms BSP’s (central bank) expected inflation path for 2009 and 2010 and gives the BSP room to ease further," Tetangco said in a mobile phone text message to reporters after the official release of the inflation data.

"Current assessments show risks to inflation remain tilted towards the downside," he added.

The central bank is widely expected to cut its key overnight borrowing rate to a record low of 4 percent on July 9 to spur flagging economic growth.

The government has forecast the economy to grow only 0.8 to 1.8 percent this year due to the much-felt economic crisis.

Inflation is seen to average between 2.5 and 4.5 percent for the whole of 2009.

ABS-CBN News

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