Manila c.bank sees no need for exit strategy yet

MANILA, Nov 18 - The Philippine central bank has enough leeway to continue its easy monetary policy and there is no urgency to bring in an exit strategy despite a possible uptick in inflation, Governor Amando Tetangco said on Wednesday.

"We have enough headroom in the inflation target," he told reporters. "There will be some increase in the inflation rate but this will be manageable."

"There is no pressure or urgency for the BSP to implement an exit strategy."

Tetangco also said that when the time came to tighten policy the authority would most probably drain some liquidity from the system before embarking on interest rate hikes.

The bank has kept its key overnight borrowing rate at a record low of 4.0 percent since July and analysts do not expect a hike until at least the second quarter of 2010, when price pressures are likely to increase and growth is likely to pick up.

Annual inflation jumped to 1.6 percent in October from 0.7 percent in September, the highest since May, but remained within market and central bank estimates. Officials largely attributed the jump to higher food prices following typhoons in Septemebr and October.

Earlier this month, the central bank forecast 2009 average inflation at 3.28 percent and 2010 inflation at 4.02 percent, slightly above earlier estimates but well within its targets.

This week, the government removed a price cap on fuel prices that has been in force since mid-October on the main island of Luzon and analysts expect prices to tick up over the next few weeks.

While this could lead to a pick-up in inflation, Tetangco said it would remain well within manageable bounds.

The central bank holds its last policy meeting for the year on Dec 17.