By MAX ESTAYO

Inflation leapt to a 15-month high of 4.9 percent last month signaling an end in cuts in key interest rates.

Analysts said the January inflation from December was 1.2 percent, the biggest monthly jump in 3.5 years.

"That rules out interest rate cuts then," said Song Seng Wun, an economist with CIMB-GK Research.

"At this juncture, when the economy has been strong, the central bank would prefer to keep interest rates on hold."

Only last week, the central bank cut its overnight borrowing rate by 25 basis points to 5 percent, its lowest level since May 1992, and signaled it had room for more easing by describing price pressures as "manageable".

Strong economic growth persuaded the central bank not to cut rates by 50 basis points but some economists said even its quarter-point move was too much.

"With developments in China suggesting that more inflationary pressure is in store, the risk now is that inflationary expectations have been given a little too much leash," said Vishnu Varathan, an economist with Forecast Pte.

"‘Benign’ is a term that the central bank does not have the luxury of using to describe price pressures", he said.

January inflation exceeded the forecasts of 3.7-4.4 percent for the month and 3.5-4.4 percent for the whole year.

Inflation was at 3.9 percent in December and January last year.

"Food and non-food items showed higher price increments," BSP governor Amando Tetangco Jr. said.

"In general, we are seeing the impact of the onset of lean months in agricultural production and hikes in power and water rates. Base effects are becoming manifest," Tetangco added.

Food prices soared in January, partly fuelled by the rising cost of rice. The central bank expects a strong peso to moderate price pressures this year. Inflation last year averaged 2.8 percent, the lowest since 1986, helped by a 19 percent surge in the peso against the dollar.

But the currency’s rise of nearly 2 percent in January failed to stop prices rising. The whole of Asia is struggling with higher prices for energy and food due to tight supply and robust demand.

The peso weakened to 40.73 per dollar on Tuesday from Monday’s close of 40.68. The main stock index was down 1.07 percent, tracking overnight losses on Wall Street.

The central bank’s next rate meeting is on March 13. Last year, it cut rates four times by a total of 225 basis points. - Reuters

BSP deputy governor Diwa Guinigundo said a possible resurgence of the La Nina weather phenomenon may disrupt farm output while instability of oil supply in the world market will continue to put pressure on domestic pump prices.

However, he said, the sustained rise in the peso will help moderate increases in domestic oil prices.

The BSP’s key overnight rate was lowered to five percent on Jan. 31, the fifth adjustment since July last year, to keep pace with the reduction in the Fed rate, currently at three percent.

Tetangco said "monetary authorities will continue to assess the latest price developments and pitch policy to corresponding inflation outlook and balance of risks."