By Gde Anugrah Arka
JAKARTA (Reuters) - Asian policymakers grappled with aresponse to inflation on Tuesday in an era of $120-a-barrel oiland record commodity prices, with Jakarta raising rates andothers saying they hoped the problem would soon be undercontrol.
Inflation in the Philippines neared a three-year peak, butthe central bank said it would keep its powder dry until pricesstart feeding into wages.
A Korean state think-tank forecast the fastest inflation inseven years in 2008, but the only move analysts expect fromthis week's policy review is a rate cut to shore up sagginggrowth.
In India, where the central bank kept its policy ratesteady last week, an official said he expected inflation tomoderate within weeks.
It took the news of a planned fuel price hike to force theIndonesian central bank into its first rate hike in sinceDecember 2005.
After April inflation spiked to a 19-month high thegovernment said on Monday it planned to raise fuel prices, ahighly sensitive issue that has sparked protests in Indonesiain the past and contributed to the downfall of the Suhartogovernment in 1998.
"If the average fuel price hike is at around 30 percentthis month, then May inflation is likely to spike very high.The year-on-year figure might rise to double digits," saidJuniman, an economist at Bank Internasional Indonesia.
Several regional central banks have resisted raising ratesfor fear they could hurt economies already feeling the impactof the global credit crisis, triggered by mortgage defaults inthe United States, the biggest export market for much of Asia.
Many governments have opted for subsidies and exportcontrols to contain inflation, much of which they believe hasits roots in the strong global demand for fuel and othercommodities.
Economists say some central banks are behind the curve,letting loose monetary conditions push real interest rates,adjusted for inflation, into negative territory. That in turnhas spurred inflation higher by forcing consumers to spend morerather than save.
Consumer prices are rising at a double-digit pace inVietnam and Sri Lanka. Inflation has hit a 26-year high inSingapore, and is near decade-highs in China and Hong Kong andthree-year highs in India and the Philippines.
STEADY IN AUSTRALIA
In Australia the central bank kept interest rates steady ata 12-year high of 7.25 percent and made comments that showedpolicymakers were becoming less concerned about inflation thanmarkets had expected.
In a brief statement following Tuesday's monthly policymeeting, Reserve Bank of Australia Governor Glenn Stevensacknowledged inflation would be high in the short term, butlooked for a gradual fall over time as demand cooled.
Core inflation surged to a 17-year high of 4.2 percent lastquarter, well above the central bank's 2 to 3 percent targetband.
"In order to reduce inflation over time, growth inaggregate demand needs to be significantly slower than it wasin 2007," said Stevens. "Evidence is accumulating that this isoccurring."
The Australian central bank hiked rates in February andMarch.
The Philippines also expressed hope that inflation might becooling while reporting that April consumer price index jumpedby 8.3 percent from a year earlier, the biggest rise since May2005.
The price of rice, a staple in the Philippines, soared bynearly 25 percent from a year ago. Overall food prices rose 12percent, the government said on Tuesday.
"The continued uptick was as projected although themagnitude was higher than expected," Gov. Amando Tetangco saidin a text message to reporters.
He said prices should cool when supply constraints eased,but reiterated that the central bank would "act decisively" ifcommodity-fuelled inflation spread to the broader economy.
Analysts said a Philippine rate hike, the first sinceOctober 2005, was in the offing.
"This is an upside surprise certainly and there might bemore in store," said Frederic Neumann, an economist at HSBC,who expected Philippine interest rates to rise by a total of 75basis points this year.
In India, Montek Singh Ahluwalia, deputy chairman of thePlanning Commission which charts the country's five-yeareconomic plans, said he expected annual inflation may moderatein a few weeks.
"I do hope that in the next few weeks inflation willmoderate. The government can take more measures if prices arecontained," he said.
South Korea's top state-run research agency, the KoreaDevelopment Institute, lifted that country's 2008 inflationforecast to 4.1 percent from 2.8 percent.
The Bank of Korea is meeting for its rate review onThursday and economists polled by Reuters could not agree onwhether it would cut its key interest rate or hold it at 5percent.
(Additional reporting by Wayne Cole in Sydney, SebastianTong and Yoo Choonsik in Madrid, Karen Lema in Manila, RajkumarRay in New Delhi and Cheon Jong-woo in Seoul; Writing by SonyaHepinstall; Editing by Dayan Candappa and Tomasz Janowski)
