Higher inflation spurs follow-up rate increase POLICY RATES were increased anew yesterday as a continued rise in consumer prices put official inflation targets at risk. A 25-basis-point adjustment was announced by the Monetary Board after the National Statistics Office (NSO) said annual inflation picked up to 4.5% in April from 4.3% a month earlier. "In deciding to increase policy rates anew, the Monetary Board noted that the latest baseline inflation forecasts continue to suggest that the 3-5% inflation target for 2011 remains at risk, mainly as a result of expected pressures from oil prices," central bank Governor Amando M. Tetangco, Jr. said. The move brought the Bangko Sentral ng Pilipinas’ (BSP) overnight borrowing and lending rates to 4.5% and 6.5%, respectively. Rising inflation -- traced to continuing unrest in the oil-producing Arab world and higher commodity prices -- had prompted monetary authorities last March to raise key rates for the first time since July 2009. "Without the twin rate hikes inflation would have been 5.6% for 2011 and 4.16% for 2012, but now it is back to 3-5% with this year’s [result expected to be] on the top of the target and next year’s at the lower end," central bank Deputy Governor Diwa C. Guinigundo told reporters. "The 25-bps increase in March and 25-bps increase in May are warranted in order to ensure that the 5% will not materialize and to restore the forecast between 3-5%," he added. The outlook of inflation still falling within the target range is based on a wage hike of not more than P25 per day, Dubai crude at $118 per barrel and an exchange rate of P42-45 against the dollar, Mr. Guinigundo said. Analysts said rising domestic prices and robust demand, coupled with mounting global fuel prices, had fanned inflation, which would continue to accelerate in the coming months. "The rise in inflation was driven by utilities and service sector costs," Barclays Capital regional economist for Southeast Asia Prakriti Sofat said in an e-mail. Standard Chartered research head for Asia Nicholas Kwan, in a separate e-mail, noted that sustained fuel price increases would raise inflation further in the coming months. "We do expect the uptrend to stay for a few months given high oil prices, still elevated international commodity prices and more importantly, robust domestic demand," he said. Hong Kong Shanghai Banking Corp. regional economist Sherman W.K. Chan, concurred, saying: "Essentially, the run-up in global food and oil prices during the past few months may have yet to be fully passed on to Filipino consumers." Mr. Tetangco also noted that strong capital inflows needed "careful" attention to ensure that these do not "exacerbate domestic liquidity levels and fan inflationary pressures..." Mr. Guinigundo added, "We are still open to using capital controls, but we don’t see the need for it at the moment." Given this analysts surmised that the Monetary Board would continue hiking policy rates during its next meetings on June 6 and July 28. "The policy rate is still only one notch above its historical low, suggesting that the monetary policy setting remains highly accommodative in the Philippines," Ms. Chan said. Ms. Sofat, meanwhile, said: "Our base case remains that the central bank will ... further [increase by] 25 bp in July, with an end-of-year rate of 4.75%." The central bank, said Mr. Tetangco, is not ruling out further rate hikes: "The Monetary Board remains prepared to take appropriate actions necessary to ensure the achievement of BSP’s price stability [mandate]" The NSO, in announcing the April inflation result, said it was due to faster growth in all commodity groups except food, beverages and tobacco. The 4.4% uptick was within the BSP’s forecast of 3.7-4.7% but higher than the median 4.4% in a BusinessWorld poll. Core inflation, which excludes volatile price movements of products such as food and energy, accelerated to 3.8% last month from a revised 3.5% in March. Fuel, light and water jumped by 8.8%, faster than March’s 7.7%. Services, which covers gasoline and diesel stations, rose by 6.5% last month from 5.7%. "Higher charges for electricity rates and price add-ons in LPG (liquefied petroleum gas) and kerosene in most regions including Metro Manila raised the fuel, light and water index," the NSO said. Electricity bills for the month of April were higher by P0.20 to P5.07 per kilowatt-hour. The price of Dubai crude, meanwhile, averaged $115.43 per barrel, 38.52% higher than last year’s $83.33 per barrel. Month on month, prices of consumer items rose by 0.8% in April, faster than the 0.3% recorded in March. Economists said inflation would likely be higher this month. "For May, inflation rate will be from 4.7-5.0% as commodities and utilities such as oil, electricity, water, processed food, production inputs and transportation fares will push inflation up," University of Asia and the Pacific economist Cid L. Terosa said. University of the Philippines economist Benjamin E. Diokno agreed, saying: "May inflation should be in the neighborhood of 5%." --Antonio Siegfrid O. Alegado and Judy Dannibelle T. Chua Co
It added that an initial investigation suggested the salmonella came from a flavoring ingredient. "The quality and safety of our products are non-negotiable priorities for us, and it is in this regard that we have decided to do a complete voluntary recall of all Maggi Rich Mami Noodles, even outside those of the affected batches, for thorough product evaluation and testing," Nestlé said, adding that it so far had not received any consumption-related complaints. "The product is safe to eat if the cooking instructions are followed," it claimed. Metro Manila consumers who purchased the recalled products were requested to contact Nestle via 8980061 while those in provincial areas were asked to call 1-800-100-637853. Food and Drug Administration director Suzette H. Lazo said Nestle had informed the government of the recall on Wednesday. "They (Nestle) acted responsibly. This speaks very well of the company," she said. Ms. Lazo said the state agency would be conducting its own tests on the food. "We have standard operating procedures when it comes to these matters. We will do our own analysis of the noodles and we will require them (Nestle) to submit updates on the recall everyday since this will be done nationwide," she said. -- Louella D. Desiderio |
U.S. Stocks Decline as Commodities Retreat Most Since 2008, Chevron Drops U.S. stocks tumbled, sending the Standard & Poor’s 500 Index down for a fourth straight day, as shares of energy and raw-material companies slumped following the biggest plunge in commodities in almost two years. Freeport-McMoRan Copper & Gold Inc. (FCX) and Exxon Mobil Corp. (XOM) slid at least 2.5 percent as metal prices sank and oil fell below $100 a barrel for the first time since March 17. General Motors Co. (GM) slumped 3.1 percent after saying that Chinese sales declined. The NYSE Arca Airline Index jumped 3.2 percent as crude extended its loss since April 29 to 12 percent. FedEx Corp. (FDX), operator of the biggest cargo airline, added 2.9 percent. The S&P 500 retreated 0.9 percent to 1,335.10 at 4 p.m. in New York. The benchmark gauge for American equities has declined 2.1 percent this week. The Dow Jones Industrial Average decreased 139.41 points, or 1.1 percent, to 12,584.17 today. “It’s driven by fear,” said James Gaul, a money manager at Boston Advisors LLC in Boston, which oversees about $1.8 billion. “Fear of losing of money on positions for the short- term traders to long-term concerns that the economy is weakening and risky assets aren’t performing as well as they have done, which you can extrapolate into oil prices. Big price moves like these are most often sentiment-driven.”
Yields on benchmark 10-year notes fell to a six-week low and rates on six-month bills touched a record for a fourth consecutive day before a report tomorrow that’s forecast to show job growth slowed in April. The premium investors demand to hold Treasuries instead of 10-year inflation-protected debt dropped to the lowest in a month. The Federal Reserve purchased $1.9 billion in Treasuries maturing from August 2028 to February 2041. The Standard & Poor’s 500 Index dropped 1.2 percent. “Commodities and other assets are coming off, and some of that money is coming back into the Treasury market,” said Thomas Tucci, head of U.S. government bond trading at Royal bank of Canada’s RBC Capital Markets unit in New York, one of 20 firms that trade directly with the Fed. “The economic forecasts have been pulled back dramatically. Guys have been caught offside.” The yield on the 30-year bond fell seven basis points, or 0.07 percentage point, to 4.26 percent at 5:01 p.m. in New York, according to Bloomberg Bond Trader prices. It touched 4.25 percent, the least since Dec. 7. The 4.75 percent security due in February 2041 rose 1 5/32, or $11.56 per $1,000 face amount, to 108 9/32. |
Oil Drops Below $100 a Barrel on Concern Growth Will Slow, Gain in Dollar Crude oil tumbled below $100 a barrel as commodities dropped the most in two years on concern that economic growth will slow and as the dollar strengthened against the euro. Oil fell 8.6 percent after the Labor Department said applications for jobless benefits rose to the highest level since August, a signal that fuel demand may drop. Silver led declines in the Thomson Reuters/Jeffries CRB Index. The dollar advanced after European Central Bank President Jean-Claude Trichet said he wouldn’t raise interest rates. “We’ve got a bit of a blood bath going on now,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “Once the ECB refused to raise rates we saw the dollar take off and the drop in commodities accelerate.” Crude oil for June delivery fell $9.44 to $99.80 a barrel, the lowest settlement on the New York Mercantile Exchange since March 16. Futures have tumbled 12 percent over the past four days and had the biggest one-day decline since April 20, 2009. Prices are up 25 percent from a year ago. Crude oil may drop as low as $98 a barrel after breaching technical support to settle below its 30-day moving average for the first time since February, according to technical analysis from Again Capital LLC. Futures declined from the settlement, falling as low as $98.25 a barrel in after-hours electronic trading on the Nymex. The exchange extended the trading limit for a one-day move in crude to $20 from the usual $10 after the close of floor trading. When the limit is reached, the exchange halts trading beyond it for five minutes. The dollar increased as much as 2.1 percent to $1.451 per euro, the highest level since April 26. A drop in the greenback makes commodities priced in the U.S. currency more attractive for investors. |
Sources: Bloomberg, Reuters, www.inquirer.net, www.philstar.com, www.bworldonline.com, www.cnnmoney.com
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