INSTANT VIEW 1-Philippine March inflation rate at 3-mth high

MANILA, April 6 (Reuters) - The Philippine's annual inflation rate rose to its highest in three months in March, largely due to increases in utilities and services, although the increase was within market and central bank expectations.

Annual inflation in March was at 4.4 percent, faster than February's 4.2 percent and in line with the central bank's 3.9-4.8 percent forecast.

The median forecast in a Reuters poll of 13 economists was for annual inflation of 4.5 percent in March.

Core consumer prices, which strip out some volatile food and energy items, climbed 3.9 percent in March from a year earlier, up from February's 3.6 percent rise, the statistics office said.

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KEY POINTS:

* March CPI rose 4.4 pct from a year earlier, core rose 3.9 pct. In February, headline CPI rose 4.2 pct, core rose 3.6 pct.

* Central bank had forecast annual inflation of 3.9-4.8 percent in March.

* March CPI rose 0.2 pct from February, against a monthly rise of 0.4 percent in February.

* Key items in March, change from year earlier:

- Food, beverages and tobacco: up 3.1 pct (Feb up 3.8 pct)

- Food alone climbed 3.1 pct (Feb up 3.8 pct)

- Rice up 0.7 pct (Feb up 2.0 pct)

- Fuel, light and water climbed 14.6 pct (Feb up 11 pct)

- Services increased 6.8 pct (Feb up 5.6 pct)



COMMENTARY:

KENNETH CHENG, CHIEF ANALYST, INFORMA GLOBAL MARKETS, SINGAPORE:

'It's below my expectation but overall I believe the trend is going to creep up again, mainly because of oil prices plus the impact of El Nino. Inflation could be around 4.8 percent in April. But it won't be a runaway trend. It's still moderate enough for the central bank to keep monetary policy steady for the first half of the year.'



EDWARD TEATHER, ECONOMIST, UBS, SINGAPORE:

'It's pretty much in line with consensus. This doesn't change the picture on monetary policy. The central bank is on a wait-and-see mode and it is unlikely to change its commentary on monetary policy. Inflation could head higher in the near term, but it's not a worrying trend for the central bank.'



DAVID COHEN, DIRECTOR FOR ECONOMIC FORECASTING, ACTION ECONOMICS, SINGAPORE:

'It's within expectations. The core inflation has bottomed out but it's still reasonably moderate. I think the central bank can remain patient for a while longer. Clearly they're watching carefully and we do expect them to start tightening around the middle of the year. This is the same picture for many of the regional central banks.'



MARKET REACTION:

- The Philippine peso was quoted at 44.98 to the dollar in early trade, firmer than its Monday close of 45.01.

- The local stock market was not yet open.



LINKS:

- For more data, visit the National Statistics Office Web site: http://www.census.gov.ph



BACKGROUND:

* Central bank governor Amando Tetangco said last month monetary authorities were unlikely to hike the key overnight borrowing rate from a record low of 4 percent during the first half of 2010 with a manageable inflation outlook.

* Inflation is seen peaking at 5 percent levels in the second and third quarter of the year due to expected rises in power and water rates, the central bank has said.

* The central bank expects inflation to average 4.64 percent in 2010, based on its latest estimates, well within its target range of 3.5 percent to 5.5 percent.

* The central bank began unwinding crisis-driven liquidity measures when it raised the rate on a short-term lending facility in January in response to improving financial market conditions.

* The central bank holds its next policy meeting on April 22.

(Reporting by Manolo Serapio Jr. and Monicca Egoy; Editing by Rosemarie Francisco and John Mair)

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