Manila, Philippines — Inflation in the Philippines accelerated slightly in August to 4.0 percent but stayed comfortably within the central bank's forecast range, affirming its benign inflation outlook.

In the eight months to August, inflation was 4.2% on year, still at the lower-end of the central bank's target band of 3.5% and 5.5% for this year.

Still, economists say the bank could begin raising interest rates in the last quarter of the year to contain price pressures amid encouraging economic growth.

The National Statistics Office reported on Tuesday that the consumer price index, the main barometer of inflation in the Philippines, rose 4.0% from a year earlier and 0.2% from the month before, propelled by the rising costs of utilities, food and clothing. In July, they had been 3.9% and 0.2%, respectively.

In August last year, annual inflation was 0.1%.

"These support our view that the inflation environment during our policy horizon remains manageable. Nevertheless, we are cognizant that the uneven pace of growth around the globe could produce demand price pressures and volatilities in international commodity prices," said Bangko Sentral ng Pilipinas Amando Tetangco in a text message to reporters.

"We will continue monitoring developments to see if there are changes in the inflation outlook that could warrant changes in our policy stance," Tetangco added.

The headline inflation number for August is within the central bank's forecast range of 3.6% and 4.5% and just above the median forecast of 3.9% in a Dow Jones Newswires poll.

However, core inflation, which excludes the more volatile food and energy items in the consumer basket, climbed to 4.2% from July's 3.9%.

Vincent Tsui, an economist with Standard Chartered, said that last month's higher core inflation reading "underpins demand pull inflation is gathering momentum along with strong GDP growth in the first two quarters of 2010."

The domestic economy expanded a better-than-expected 7.9% in the first half of the year, well above the state's growth target of 5% to 6% this year.

"We maintain our view that BSP will start hiking in the fourth quarter by 25 basis points to manage inflation expectation and normalize the real interest rate from the current zero level," Tsui said.