Expensive tomatoes and pork pushed the rate of increase in prices of basic goods and services to 2.9 percent in January, the Philippine Statistics Authority (PSA) reported on Wednesday, Jan. 5.
Last month's headline inflation matched the same rate as December 2024 but inched up from 2.8 percent in January 2024.
January's outturn was still within the government's two- to four-percent target range of manageable year-on-year price hikes deemed conducive to economic growth.
National Statistician Claire Dennis S. Mapa told a press briefing that the top contributors to the inflation uptick were food items, especially tomatoes, pork, poultry meat, and fish like galunggong.
Dining out in restaurants and rental fees were also more expensive last month than a year ago, Mapa said.
These offset the deflation, or 2.3-percent year-on-year decline, in rice prices in January, he added.
Economists expect downward inflation in 2025, from 2024's 3.2 percent, to allow the Bangko Sentral ng Pilipinas (BSP) to lower borrowing rates and bolster the domestic economy, which has been reeling from below-target growth rates over the past two years due to strong typhoons last year and elevated consumer prices in the previous year. The average inflation of six percent in 2023 was the highest annual rate since the 2008 global financial crisis.
BSP Governor Eli M. Remolona Jr. signaled over the weekend a total of 50-basis point (bp) cut in the policy rate this year, or 25 bps per semester.
BSP rate cut
Private-sector economists polled by Manila Bulletin are expecting the Philippine central bank to continue reducing key interest rates during the upcoming monetary policy meeting as majority of expectations leaned towards inflation slowing slightly in January.
Economists monitoring the economic development in the Philippines anticipate the increase in consumer prices to have accelerated at a slower pace in January compared to the December print of 2.9 percent.
Of the 11 economists, the median inflation forecast was 2.8 percent, reflecting improved supply conditions, with lower rice prices and electricity rates helping offset higher costs of food, fuel, and water.
Germany-based Deutsche Bank said that the local inflation is expected to ease to 2.7 percent “as supply conditions gradually normalize after the weather-related disruptions late last year.”
Six other economists predicted inflation to clock in slower than December’s, including Michael S. Ricafort (chief economist at Rizal Commercial Banking Corp.), Angelo Taningco (chief economist at Security Bank Corp.), Ser Percival K. Peña-Reyes (director at the Ateneo Center for Economic Research and Development), Sarah Tan (Moody’s Analytics economist for the Philippines), Chinabank Research, and Jonathan Ravelas (senior adviser at Reyes Tacandong & Co. and managing director of e-Management for Business and Marketing Services).
While seven economists forecasted a slower January inflation, three economists projected a three-percent inflation rate last month, including Bank of the Philippine Islands (BPI) lead economist Emilio S. Neri, Jr., Philippine National Bank (PNB) chief economist Alvin Arogo, and think tank Pantheon Macroeconomics chief emerging Asia economist Miguel Chanco.
According to Neri, stable rice prices and manageable global commodity costs have kept food, transport, and utility inflation in check, thus a hairline increase in overall prices.
Alex Holmes, Economist Intelligence Unit (EIU) regional director for Asia, gave the highest forecast of 3.3 percent but expects this rate to fall below three percent in February.
Neri noted that “the January inflation print is crucial as this might influence the policy decision of the BSP [Bangko Sentral ng Pilipinas] on February 13.”
The Philippine Statistics Authority (PSA) will release January’s consumer price index (CPI) report today, Feb. 5. A week later, the Monetary Board (MB) will conduct its first monetary policy meeting for 2025.
Another 25 bps cut
Neri stated that aside from the “disappointing” gross domestic product (GDP) growth rate in 2024, a lower-than-expected inflation rate for January would justify a further reduction in the key borrowing costs.
2024 Philippine economy clocked in at 5.6 percent, below the market expectations and below the government target of 6.0 to 6.5 percent growth target.
That said, Deutsche Bank expects the BSP “to continue cutting its policy rate in February and April in 25bps steps to support growth.” This suggests 50 basis points in cut for the first half of 2025.
Alongside Deutsche Bank, Taningco and Chanco also look forward to another 25 basis-point cut during the Feb. 13 monetary policy meeting.
“A deeper slowdown increases the likelihood of more cuts later in the year, though BSP will have to remain watchful of external pressures, especially on the peso,” the bank said.
Likewise, Neri said that “aggressive rate cuts from the BSP may exert pressure on the peso, which may contribute to inflation expectations.” This comes as the economist continues to see possible “risks that could limit the BSP’s rate cuts to just 50 bps this year.”
According to Neri, the country’s wide account deficit keeps the local currency exposed to external risks, including U.S. Federal Reserve moves and policies under the recently inaugurated U.S. President Donald Trump.
Meanwhile, Holmes leans on the likelihood of the central bank pausing its easing cycle, citing the successive reductions in the recent meetings. The key policy rate was trimmed by a total of 75 basis points, settling at 5.75 percent last year.
The pause, Holmes said, would give the central bank “time to pause and assess the impacts of monetary easing so far.”
“We do however expect the BSP to continue easing gradually throughout the remainder of 2025,” he concluded.
Rice
The Department of Agriculture (DA) said the decline in the inflation rate of rice in January is attributed to government interventions to stabilize prices, particularly the tariff cut on the staple food last year.
According to the Philippine Statistics Authority (PSA), rice posted a year-on-year deflation of -2.3% last month, a prominent decrease from 0.8 percent in December 2024.
The PSA reported that this is the lowest inflation rate for rice since June 2020, which posted a -2.3 percent.
Current price trends suggest that the deflation in rice prices will continue through July 2025.
DA Assistant Secretary Arnel de Mesa told reporters on Wednesday, Feb. 15, that the “main contributor” to the downtrend is the lowering of the tariff on imported rice from an initial 35 percent to 15 percent.
President Ferdinand “Bongbong” Marcos Jr. issued this order in June of last year, under Executive Order (EO) No. 62.
De Mesa noted that once the tariff cut was in effect, it resulted in the continued decline in rice inflation.
He cited that starting July 2024, rice inflation significantly declined from that month’s 20.9 to December’s 0.8.
“So, you can see, from this trend, ‘yung epekto ng tariff reductions beginning July, it caused dahan-dahan na pagbaba (the effect of the tariff reductions beginning in July caused a gradual decline),” said De Mesa.
However, the official noted that this downfall was not as quick compared to that when it was on the upward trend.
This, he said, is the reason why the DA’s declaration of a food security emergency on rice will continue to be in effect.
The declaration, which took place on Monday, authorized the National Food Authority (NFA) to release its rice buffer stocks to help stabilize prices.
De Mesa said on Tuesday that the emergency measure will cease once price levels return “close” to that of pre-July 2023 levels. (With a report from Dexter Barro II)