Inflation likely lower in January – analysts

BAGUIO CITY — Steady food prices coupled with manageable transport and utility costs could have led to inflation edging down last month, analysts said.

The median forecast among nine analysts polled by The Manila Times was 2.8 percent, easing from December 2024’s 2.9-percent result and in line with the Bangko Sentral ng Pilipinas’ (BSP) 2.5- to 3.3-percent estimate for the month.

If realized, inflation — which has stayed within the 2.0- to 4.0-percent target since August last year — will also have snapped a three-month rise.

With the lowest forecast of 2.5 percent, Sun Life Investment Management and Trust Corp. economist Patrick Ella said that stable prices over the month, especially for rice, would have contributed to lower inflation.

This, along with lower growth print last year, could prompt the central bank to lower interest rates again later this month, he added.

Ella forecast a fourth successive 25-basis point (bps) cut to be announced after the BSP’s policymaking Monetary Board meets on Feb. 13, saying that a “weakness in consumption and private investments points to the need for support from the monetary policy side at the moment.”

Rizal Commercial Banking Corp. chief economist Michael Ricafort, meanwhile, said consumer price growth was likely lower at 2.6 percent as a lower rice import tariff would have weighed on food inflation.

Moody’s Analytics economist Sarah Tan and HSBC Global Research economist Aris Dacanay both expect inflation to have hit 2.7 percent.

Tan said that food, fuel and water would have pressured inflation, noting that “while electricity rates eased on the back of lower generation charges, domestic fuel prices were up over three straight weeks in January due to higher global oil prices.”

“Further, water rates were also upwardly revised as of 1 January, which will add to households’ and businesses’ utility bills through the year. The higher water rates are said to contribute to the expansion of water service and infrastructure projects.”

Dacanay, however, said that while lower rice prices would have delivered a large disinflationary impulse, consumer price growth likely continued to be sticky.

“We expect headline inflation to decelerate in January on the back of retail rice prices falling to P37/kg and electricity prices easing,” he said.

“However, the deceleration should have been faster if it weren’t for other noncore components of the CPI (consumer price index) basket. For instance, retail fuel prices continue to climb due to a strong USD (dollar) while pork prices jumped as the increase in African swine flu cases took a toll on supply.”

Meanwhile, Chinabank Research and Union Bank of the Philippines chief economist Ruben Carlo Asuncion said that with some upticks in key food items, inflation would have dropped to just 2.8 percent.

“Higher prices were observed for fuel as well as for key food items such as vegetables, meat, fish, and fruits,” Chinabank Research said, adding that “the annual adjustment in water rates in Metro Manila, along with the increase in sin taxes also added to upward price pressures.”

“However, their impact was tempered by a decline in rice prices and lower electricity rates in Meralco-serviced areas.”

Three economists, meanwhile, believe that inflation could have risen in January. Philippine National Bank economist Alvin Arogo, Pantheon Macroeconomics economist Miguel Chanco and Bank of the Philippine Islands senior economist Emilio Neri all saw inflation hitting 3.0 percent.

Neri, however, said that food inflation would be “steady largely due to reports that rice prices have declined vs prior months with favorable supply prospects following the end of El Niño.”

“Inflation in other items such as transport and utilities have been manageable also given the disinflationary impact of economic slowdowns observed in major economies like China,” he added.

“Relative stability of the FX market may have also tempered some increases in core services components of CPI observed last December.”

Chanco, meanwhile, said “firmer transport inflation and a — temporary — base effect-driven rise in food inflation” could have led to higher inflation.

For Arogo, “the lowered rice tariff, downtrend in Vietnam rice prices, and favorable rice base effect should keep inflation within the BSP’s target this year.”