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
Nestlé sets Maggi instant mami recall
A RECALL of Maggi instant mami products was announced yesterday by Nestlé Philippines, Inc., which said tests had found traces of salmonella in two beef-flavored batches.
"The product recall is a precautionary measure being taken to ensure the safety and quality of our products and in the interests of our consumers, which we regard as of paramount importance," Nestlé said in the advertisement.
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 | 
