September 7, 2018 / 9:29 AM / 7 months ago

UPDATE 1-Philippines will curb speculators to fight peso swings - gov

* to take “strong immediate action” vs inflation

* Peso hits lowest level in more than 12 years vs dollar

* Consumer outlook turns ‘pessimistic’ for Q3

* Governor: A policy meeting before Sept 27 ‘an option’ (Adds negative consumer outlook in paragraphs 6,7)

MANILA, Sept 7 (Reuters) - The Philippine central bank will take all actions necessary to deal with speculative activity to prevent sharp swings in the foreign exchange market, its governor said on Friday, as the peso hit a more than 12-year low against the dollar.

Consumer prices have been under pressure due in part to the peso’s weakness, sparked by fears of a widening Philippine current account deficit and an escalating Sino-U.S. trade war.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla said policymakers will take “strong immediate action using the full range of instruments in its toolkit” to manage inflation, which quickened to its fastest pace in nearly a decade in August.

“The follow-through actions will also address other threats to higher inflation such as excessive exchange rate volatility,” Espenilla told reporters in a mobile phone message.

The Philippine peso touched 53.975 to the dollar during Friday’s trading, its lowest since June 2006.

The consumer outlook has turned “pessimistic” for the third quarter after eight consecutive quarters of positive reading, with rising commodity prices, such as for rice, topping the list of concerns, the central bank said in a statement.

Its latest consumer expectation survey showed the overall confidence index returning to negative territory this quarter, indicating that pessimists outnumber optimists.

The central bank has raised interest rates by 100 basis points since May, including a 50 bps hike on Aug. 9, which brought the rate on its overnight reverse repurchase facility to 4.0 percent.

It has signalled it was open to further tightening to tame consumer inflation, with the economy strong enough to accommodate higher borrowing costs.

After August’s forecast-topping inflation rate of 6.4 percent was released on Wednesday, some analysts said the central bank would have to jack up rates aggressively. .

The central bank has a 2-4 percent inflation target for this year and next.

When asked if the central bank would consider holding an “emergency policy meeting” ahead of its scheduled Sept. 27 review, Espenilla said: “That’s an option. We’ll see.”

Reporting by Karen Lema; Additional reporting by Enrico dela Cruz; Editing by Richard Borsuk

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