MANILA, May 5 (Reuters) - Philippine annual inflation was higher than expected in April, cementing expectations the central bank will raise rates for the second meeting in a row later on Thursday to keep consumer prices in check.
The consumer price index rose 4.5 percent in April from a year earlier, its highest gain since April 2010. The rate was slightly above the 4.4 percent forecast by economists and closer to the upper end of the central bank's forecast range of 3.7 to 4.7 percent.
Core consumer prices, which strip out some volatile food and energy items, rose 3.8 percent in April from a year earlier, faster than March's revised 3.5 percent rise.
Headline annual inflation in March was 4.3 percent.
The acceleration in inflation in April is "hardly a surprise, given the strong inflationary pressures coming from food and oil recently," said Sherman Chan, economist at HSBC in Hong Kong said.
She maintained her view that the central bank will raise its policy rate by 25 basis points later Thursday, and make a similar hike at its next meeting.
The Philippine central bank, which will review policy later in the day, is widely expected to raise its overnight borrowing rate by a quarter percentage point to 4.50 percent on Thursday, after a 25 basis point hike in March, with forecasts of continued price pressures in coming months from oil and food prices.
Asia's central banks are under pressure to curb prices with interest rates and other tools without hurting growth. Analysts in a Reuters poll this week expect continued price pressures in the region despite a round of rate hikes and inflation-fighting measures. [ID:nL3E7G30BY]
India raised interest rates by a sharper-than-expected 50 basis points on Tuesday and said fighting inflation was its top priority, even at the expense of short-term growth. [ID:nL3E7G30NW]
Thailand raised interest rates this month for a sixth time since July last year, and is expected to tighten again in June. Singapore also tightened further monetary policy this month by using currency strength to fight inflation.
Governor Amando Tetangco said last week the Philippine central bank would review its inflation forecasts at its Thursday meeting with oil prices persistently above its assumed levels. In March, the central bank estimated average inflation this year to come in near the upper end of the government's target of 3-5 percent.
Policymakers have said the annual inflation rate could exceed 5 percent in the coming months before tapering off, and that they were ready to take further action to tame price pressures from global oil and food prices.
Some analysts expect total rate increases of as much as 100 basis points this year in the benchmark overnight borrowing rate from 4.00 percent at the start of 2011. The Philippines was the last major Asian economy to raise interest rates in March after the global financial crisis.
The central bank has said it was monitoring possible second round effects on inflation from higher wages, transport costs, and toll road fees.
While the central bank has assumed a hike of 25 pesos ($0.58) in the daily minimum wage in the capital Manila, labour groups are asking for a larger increase of 75 pesos. The Labour department is expected to announce its wage hike decision next week.
