The Philippine annual inflation rate, as measured by consumer price index, continued to accelerate in July, hitting a near 17-year high of 12.2 percen. June inflation was 11.4 percent while inflation in July 2007 was only 2.6 percent, according to the latest data from the National Statistics Office. The July figure was the highest since December 1991.

Higher annual inflation rates were registered in all the commodity groups except in the fuel, light and water index. The overall annual inflation rate for food alone further climbed to 18.6 percent in July from 17.4 percent in June. Higher year-on-year inflation was noted in rice at 50.0 percent in July up from 43.0 percent in June; corn, 40.6 percent from 34.3 percent; cereal preparations, 17.6 percent from 16.6 percent.

But the National Statistics Office pointed out that the monthly increase in consumer prices slowed to 1.5 percent in July from 2.3 percent in June. Monthly price increases slowed in food, beverage and tobacco – at 1.6 percent in July from 3.0 percent in June and services, at 3.1 percent from 4.0 percent.

The annual core inflation rate, which strips out volatile food and energy items, slipped to 6.3 percent in July from 6.6 percent in June. However, as the July inflation exceeded the central bank’s forecast range of 11.2 – 12 percent, it is clear that the central bank might feel forced to hike interest rates again at the next meeting at the end of August. This would then be the third hike since June.

Philippine central bank policymakers last voted on July 25 to hike overnight rates to 5.75 percent for borrowing and 7.75 percent for lending. Central bank officials have said they expect inflation to peak in the fourth quarter before falling back to an acceptable level in the first quarter of 2009.

The Philippines, which buys most of its fuel from abroad and has is now the world’s largest rice importer, is one of the Southeast Asian countries worst hit by inflation. The central bank has twice revised its inflation projection of the year from an impossible 3 – 5 percent to currently 9 – 11 percent.

Phillipine producer prices remain contained, hitting only 3.3% in June, which is the latest month for which we have data.

Last 5 posts by Claus Vistesen

• Rebalancing in the Baltics - A Preliminary Assessment - November 23rd, 2009
• Random Shots - November 13th, 2009
• The IMF on Asia's Recovery and its Sustainability - November 9th, 2009
• Too Much of a Good Thing in Australia? - November 5th, 2009
• Japanes Companies, Exports and the Current Account - November 2nd, 2009