That would give the central bank, Bangko Sentral ng Pilipinas (BSP), leeway to keep policy rates steady.

With a slowdown in prices of food and fuel prices in recent weeks, there is enough reason to believe that inflation, on a quarterly basis, had peaked in the third quarter, said Cyd Amador, managing director of the BSP statistics department.

Before hitting a high of 12.2 per cent in the third quarter, inflation averaged 9.7 per cent in the second quarter and 5.5 per cent in the first quarter.

Amador said inflation would most likely remain in the double-digit territory in the last three months of the year, adding that it might start posting single-digit level in the first quarter of 2009.

She noted that food and fuel accounted for 60 percent of the average Filipino consumer basket. The softening prices of these commodities in the international and local markets, therefore, would have a substantial impact on inflation.

Prices of food have been slowing down as a result both of demand and supply side factors, she said. The decelerating growth of the economy was dampening demand, while the improvement in farm output was boosting supply, she said.

Because of the contraction in the economy of the United States, the BSP official said, worldwide demand started to weaken and this had caused fuel prices to drop in the past weeks.

The Philippines imports more than 90 per cent of its oil requirements.

“The retreat in oil and non-oil commodity prices provides a welcome development and has diminished the upside risks to inflation,” Amador said during the briefing.

“[The BSP] can now afford to keep rates on hold as what it did in October. There is now flexibility to keep policy rates unchanged for the time being,” Amador also said.

Amador said the BSP forecast was shared by economists from the private sector.

She said a recent survey by the central bank showed companies were expecting prices to increase albeit at a pace slower than the in the past months.

For the moment, the BSP is still keeping its full-year inflation forecasts for 2008 and 2009 at 9.0-11.0 per cent and 6.0-8.0 per cent, respectively. The government’s targets are 3.0-5.0 per cent and 2.5-4.5 per cent, respectively.

Given the slowdown in price increases, Amador said, it was now probable that the official inflation target for 2009 could be achieved.