By Katherine K. Chan, A reporter
PHILIPPINE INFLATION may have stabilized in January and decreased electricity costs and a reduction in the price of vegetables helped the decline pressures from higher food and fuel costs and a weaker peso, economists said earlierficial data.
A BusinessWorld a survey of 18 economists showed a median forecast of 1.8% for January’s consumer price index, within the Bangko Sentral ng Pilipinas’ (BSP) 1.4% to 2.2% projection for the month. That means inflation will be unchanged from December and will be lower than 2.9% last year.
“Probable inflation remained stable at 1.8% year-on-year in January, which means a month-on-month increase of 0.5%, as food and energy pressures reduce the cost of utilities and vegetables,” said Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr.
January will also mark the 11thth in a straight month where inflation remained below the BSP’s target of 2% to 4%, reinforcing the view that price pressures remain subdued despite the volatile peso and high global energy prices.
The Philippine Statistics Authority will release inflation data for January on Feb. 5.
Gasoline prices rose during the month, adding to the inflation problem. The pump price adjustment in January resulted in a net increase of P1.60 per liter of gasoline, P3.80 for diesel and P2.70 for kerosene, according to industry data.
This increase was partially offset by lower electricity prices. Manila Electric Co. reduced electricity rates by P0.1637 per kilowatt-hour (kWh) to P12.9508 in January from P13.1145 in December. Households using 200 kWh paid about P33 less in their monthly electricity bills.
Currency movements also have an impact on price changes. The peso weakened sharply in mid-January, hitting a record low against the dollar, raising concerns about rising inflation from abroad.
“The higher US dollar-peso exchange rate in recent months amid political noise could have led to higher procurement costs and overall inflation,” said Michael L. Ricafort, economist at Rizal Commercial Banking Corp., in a Viber message.
The peso fell to an all-time low of P59.46 to the dollar on Jan. 15 before a modest recovery. It closed at P58.86 on Friday, according to Bankers Association of the Philippines data posted on its website.
Rice prices, which are the main cause of inflation, have declined since last year but have risen slightly since December, indicating a slight slowdown. The government reopened the rice import market on Jan. 1 after a four-month ban in September.
Data from the Bureau of Plant Industry showed rice imports totaled 248,000 metric tons from Jan. 1 to Jan. the whole month of January last year.
“The pace of decline in rice prices may slow as rice imports resume after the government’s import restrictions expired in December,” Moody’s Analytics Associate Director and economist Sarah Tan said in an emailed response to questions. “At the same time, the weak peso increased import costs, reducing the decline in rice prices in January.”
Ms Tan expects inflation to drop to around 2% for the month.
In mid-January, the average price of milled rice fell 9.56% year-on-year to P43.52 per kilo but rose 3.37% from December levels, data from the Philippine Statistics Authority showed.
Milled rice decreased by 9.13% year-on-year to P50.06 per kilo while it increased by 1.07% month-on-month. Special rice is down 4.68% from last year but up about 2% since December.
Some economists have pointed to improved weather as a countermeasure to food price pressure. HSBC Global Investment Research’s ASEAN economist Aris D. Dacanay said that inflation may have changed to +1.7%.
“Food prices, especially vegetables, are limited [December’s] surge,” he said in response to questions by email, adding that supply conditions are likely to be normalized after favorable weather.
Most analysts expect inflation to return to the middle of the BSP’s target range later this year. The economist of the Union Bank of the Philippines, Ruben Carlo O. Asuncion, said that the rate of inflation in general food and rice last year has disappeared significantly.
“As a result, we expect headline inflation to rise to more than 2% from February, as rice shortages ease and food prices begin to normalize from last year’s very low base,” he added.
Metropolitan Bank & Trust Co. (Metrobank) said rental inflation started to pick up late last year following an oversupply of condominiums following the rise of online gaming, a trend that could continue into 2026 and add upward pressure on inflation.
“Given this, inflation may remain positive but moderate,” said Metrobank research officers Maria Kaila Balite and Joaquim Pantanosas in the report. “Lower results, however, could push rent inflation ahead of normal, higher stress on the image of the subject.”
RATE CUT
The outlook for inflation is relatively positive, coupled with slower economic growth, strengthening expectations for policy improvements. BSP Governor Eli M. Remolona, Jr. on Sunday he said the central bank could deliver a rate cut of 25 basis points in a row if fourth-quarter GDP declines prove to be desirable.
“If we can help on the demand side and keep inflation low, then we will help,” he told reporters in Dumaguete City.
He said the Monetary Board is still considering whether the economic downturn is caused by weak demand or supply constraints.
Despite these risks, low inflation and weak economic momentum have bolstered expectations for further policy easing. Mr. Neri said the inflationary backdrop supports another level of reduction the next meeting of the central bank.
The Monetary Board has cut interest rates five times by 2025, bringing the market rate to 4.5%.
Meanwhile, Mr. Remolona said the central bank may revise its growth forecast for 2026 but still expects the economy to bounce back in the second half.
“We are looking to review that, I hope we will not review it.” [downward],” he said.
He added that the BSP wanted better information on the performance of the public sector through its expected survey, especially as public investment was lowered in the fourth quarter.
He previously said policymakers will weigh inflation trends, growth data and signs of US Federal Reserve policy when they meet on February 19.
