Philippine inflation accelerated to a three-month high in March as oil and food costs rose, supporting the central bank's decision to unwind stimulus measures. Bonds fell, Bloomberg said on Tuesday.

Consumer prices increased 4.4 per cent from a year earlier, after a 4.2 per cent gain in February, the National Statistics Office said in Manila today. That compares with the median forecast for a 4.5 per cent increase in a Bloomberg News survey of 12 economists.

Bangko Sentral ng Pilipinas pared back a lending program for banks last month and said it will consider doing more to reduce cash in the economy, even as it kept interest rates at a record low. Policy makers will 'monitor demand conditions' for any need to adjust the monetary policy stance, Governor Amando Tetangco said today.

'Rising inflation affirms both the market's and the view of the monetary authority that a meaningful policy tightening will probably happen in the second half,' Emilio Neri, an economist at Bank of the Philippine Islands in Manila, said before the report was released.

Three-year bonds fell, pushing yields to the highest level in more than a week as the inflation report fueled speculation the central bank may be closer to raising interest rates. The yield on the 8.75 per cent note due March 2013 rose to 5.12 per cent, the highest level since March 25, according to Amstel Financial Services.

Food, beverage and tobacco costs rose 3.1 per cent last month from a year earlier. Fuel, electricity and water prices climbed 14.6 per cent.

The Philippines imports almost all its oil and the price of the commodity has risen more than 60 per cent in the past 12 months.

The central bank left its benchmark interest rate unchanged at 4 per cent for a sixth straight meeting on March 11, the lowest level since central bank data started in 1990. Policy makers will consider doing more to reduce cash in the economy, Tetangco said last month.

The Philippines' $167 billion economy expanded 1.8 per cent in the final quarter of 2009 from a year earlier, accelerating from a decade-low 0.4 per cent in the previous three months. Economic Planning Secretary Augusto Santos said March 22 the economy probably expanded 2 per cent to 3 per cent last quarter