UPDATE 1-Philippines' Sept inflation eases to 3.6 pct y/y

* Sept pace was lower than Aug's 3.8 pct

* Sept core inflation 3.8 pct y/y, Aug was 4.3 pct y/y

* Reduced inflation pace increases scope for a rate cut

MANILA, Oct 5 (Reuters) - The Philippines' annual inflationrate slowed in September, increasing the scope the central bankhas to cut rates to support the domestic economy in the face ofgloomy global conditions.

The consumer price index rose 3.6 percent in September froma year earlier, the statistics office said on Friday, slowingfrom 3.8 percent in August, and below a Reuters poll forecastfor another 3.8 percent on-year change.

Core inflation, which strips out some of the more volatilecomponents including food, was 3.8 percent in September, easingfrom August's 4.3 percent, while month-on-month inflation wasdown 0.1 percent.

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INSTANT VIEW on Sept inflation

TAKE A LOOK on Asian c. banks

TAKE A LOOK on Asian inflation

GRAPHIC on Philippine CPI, rates, GDP:

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Central bank Governor Amando Tetangco told Reuters on Sept.26 that policy stimulus currently in place was sufficient tosupport domestic growth, but policy can be eased if needed laterthis year.

He said any adjustment to the key policy rate would dependwhether the risk of inflation accelerating or risk of economicgrowth falling was greater.

With the average on-year inflation rate in 2012's first ninemonths at 3.2 percent, near the bottom of the central bank's 3to 5 target band for the full year, economists said there wasscope to ease policy further to boost the country's growth amidthe weak global economic backdrop. A rate cut could also helpcontain the peso's strength and curb speculative inflows.

"It is becoming more likely the central bank will cutespecially if the peso again continues to appreciate at thispace," said Jun Neri, economist at the Bank of the PhilippineIslands.

Neri said Friday's data "increases the probability of a cut"when the central bank meets to review policy on Oct. 25.

The Bangko Sentral ng Pilipinas has kept its overnightborrowing rate at a record low of 3.75 percent following threecuts this year - the last in July - totaling 75 basis points.The cuts were aimed at shielding the economy against externalshocks.

The Philippine economy expanded 6.1 percent in the first sixmonths from a year earlier. Policymakers are optimistic thatgrowth will hit the higher end of a 5 to 6 percent target for2012 on robust domestic demand fuelled by remittances fromFilipinos overseas and a growing business-process outsourcingsector.

These foreign exchange inflows, plus a strong influx offoreign capital, have helped make the peso the best performingcurrency among emerging Asian economies this year, with gains ofabout 5.5 percent against the dollar.

While a strong currency can help moderate inflation, it alsomakes Philippine exports less competitive and it reduces thepurchasing power of remittances received by families ofFilipinos living and working abroad, therefore crimping growth.

(Reporting by Karen Lema; Editing by Richard Borsuk)

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Keywords: PHILIPPINES ECONOMY/INFLATION