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PREVIEW-Philippine Sept inflation seen elevated but scope to cut rates stays

* Sept pace of 3.8 pct y/y forecast in Reuters poll

* Central bank's next policy meeting on Oct 25

* CPI data expected at 0100 GMT Fri, Oct 5

MANILA, Oct 3 (Reuters) - Philippine annual inflation probably stayed close to 4 percent in September due to higher food costs, but the pace is unlikely to reduce the central bank's ability to cut interest rates, with the overall price outlook still favourable.

The consumer price index may have risen 3.8 percent in September from a year earlier, a Reuters poll of 11 economists showed, unchanged from the previous month's annual gain, which was the highest since January when the rate hit 4.0 percent.

The same poll showed that core inflation, which strips out some of the more volatile components including food, slightly picked up pace on-year in September to 4.4 percent after the previous month's 4.3 percent.

"We are not unduly worried about inflation," said Eugene Leow, an economist at DBS in Singapore. Flooding in August has raised food prices, but they should ease later, he said.

The central bank, which has a 3 to 5 percent target band for price growth in 2012, sees inflation at 3.4 percent at the end of the year, just above the 3.3 percent forecast by the polled economists.

Elsewhere in Asia, South Korea's annual inflation quickened for the first time in 10 months in September, but stayed within the target of the central bank, which is shifting focus to support growth.

Thailand's CPI rose more than expected, but that was partly due to a low base, and the central bank is likely to keep policy on hold.

The Philippine central bank governor, Amando Tetangco, told Reuters on Sept. 26 that policy stimulus currently in place was sufficient to support domestic growth, but policy can be eased if needed later this year.

The Philippine economy expanded 6.1 percent in the first six months from a year earlier. Policymakers are optimistic growth will hit the higher end of a 5 to 6 percent target for 2012, accelerating from last year's 3.9 percent expansion, despite weakening shipments of electronics, the main export earner.

"The global outlook remains challenging amid a slowdown in the major economies and external demand will continue to drag," DBS' Leow said. "Depending on how the export numbers play out, there may be a need for a further cut in the overnight borrowing rate in fourth quarter."

The Bangko Sentral ng Pilipinas, which next meets on Oct. 25 to review policy, has kept its overnight borrowing rate at a record low 3.75 percent following three cuts this year - the last in July - totaling 75 basis points. The cuts were aimed at shielding the economy against external shocks.

After the October meeting, the central bank's next and last one in 2012 will be on Dec. 13.

SEPT CPI (pct change, forecasts based on 2006 prices)

MEDIAN RANGE AUG FORECASTERS Headline CPI y/y 3.8 3.4-4.1 3.8 11 Core CPI 4.4 4.1-4.4 4.3 3 Average 2012 3.3 3.1-4.2 9 INSTITUTION SEPT CONSUMER PRICE INDEX (pct change) HEADLINE CORE AVG 2012 (yr-o-yr) (yr-o-yr) ---------- --------- ------- Banco De Oro Unibank 4.1 - - Bank of P.I 3.5 4.1 3.3 Barclays Capital 4.1 - 4.2 Credit Suisse 3.5 - 3.2 DBS 3.7 - 3.3 Forecast Pte 3.9 - - Informa Global Markets 3.8 4.4 3.5 ING 3.8 - 3.3 Maybank ATR Kim Eng 3.4 - 3.1 Mizuho Corporate Bank 3.8 4.4 3.4 Standard Chartered 4.1 - 3.1

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MEDIAN 3.8 4.4 3.3

(Reporting by Karen Lema; Editing by Richard Borsuk)

((karen.lema@thomsonreuters.com)(+632 841-8938)(Reuters Messaging: karen.lema.reuters.com@reuters.net))

Keywords: PHILIPPINES ECONOMY/INFLATION