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UPDATE 1-Philippine inflation eases to three-month low in August

* Aug CPI rises 2.4% y/y vs 2.7% in July

* Core inflation at 3.1% vs 3.3% in July

* Central bank says domestic activity recovering (Adds details, comments)

MANILA, Sept 4 (Reuters) - Philippine inflation eased to the slowest pace in three months in August, coming in below central bank and analysts’ forecasts, amid sluggish demand due to the coronavirus pandemic and giving the central bank more room for further policy easing.

The Consumer Price Index rose at an annual rate of 2.4% last month, down from July’s six-month high of 2.7%, as price increases decelerated for the heavily-weighted food and non-alcoholic beverage index, the Philippine Statistics Authority said on Friday.

The headline figure was below the bottom end of the central bank’s forecast range of 2.5% to 3.3% for the month, and the median 2.8% estimate in a Reuters’ poll.

Core inflation, which excludes volatile food and fuel prices, was 3.1%, versus 3.3% in July.

Inflation in January-August averaged 2.5%, well within the official 2%-4% target range.

Bangko Sentral ng Pilipinas Governor Benjamin Diokno reiterated the central bank was ready to “deploy all available measures in its toolkit” to mitigate the economic impact of the pandemic, even as he noted that there were “early signs of recovery in domestic activity”.

Last week, Diokno said there was room for further adjustment in both the key rate and the reserve requirement with inflation expected to remain benign.

The BSP kept its key interest rates steady at its last policy-setting meeting on Aug. 20, in what it called a prudent pause after four successive rate cuts totalling 175 basis points this year to support the domestic economy that has plunged into recession.

It has also reduced the reserve requirement ratio by 200 bps for big banks and 100 bps for small lenders. (Reporting by Neil Jerome Morales, additional reporting by Karen Lema Editing by Shri Navaratnam and Ed Davies)

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