Poll: Inflation up slightly in Dec

INFLATION could have edged up in December due to higher food and power costs, analysts polled by The Manila Times said, but still averaged within target for the entire year.

The median forecast was 2.6 percent, slightly higher than November’s 2.5-percent result and in line with the Bangko Sentral ng Pilipinas’ (BSP) 2.3- to 3.1-percent estimate

If realized, 2024 consumer price growth would have settled at 3.2 percent — also the same as the BSP’s full-year forecast — in 2024, substantially lower than the year-earlier 6.0 percent.

It would also be the first time since 2021 that the inflation, which surged in 2022 following Russia’s invasion of Ukraine — averaged within the 2.0- to 4.0-percent target.

Metrobank Research, which cited the impact of bad weather on prices of agricultural goods and higher power rates, said inflation would still have stayed unchanged at 2.5 percent in December.

It said that food inflation “likely remain[ed] as one of the top contributors … amid lingering supply-side effects of consecutive typhoons in recent months, partly weighed down by the sustained deceleration of rice prices.”

“Metro Manila pump prices remain lower year-on-year in December, but recent hikes bring current levels closer to that of last year’s,” it added.

“Should price hikes continue, the Philippines may see oil inflation begin to quicken. This is something market players and policymakers should be wary of, considering the vital role of oil in the Philippine economy.”

Meanwhile, Union Bank of the Philippines chief economist Ruben Carlo Asuncion, Rizal Commercial Banking Corp. chief economist Michael Ricafort and Emmanuel Lopez from the University of Sto. Tomas Graduate School all expect inflation to have ticked up to 2.6 percent.

“The slight uptick in December CPI (consumer price index) may have come from seasonal demand largely from the broad food items, particularly ‘noche buena’ food stuff, that would historically have cyclical upticks,” Asuncion said.

Ricafort, meanwhile, cited lower rice prices as having kept a lid on inflation following the government’s move to slash tariffs on imports of the staple to 15 percent from 35 percent in July.

Typhoon damage, however, could have led to “some increase in agricultural prices and could cause some temporary spike in prices,” he added.

This was echoed by Lopez, who said that weather disruptions, higher energy prices and increased holiday spending would be the major factors behind an uptick.

“The slight increase was somehow diffused by the stable prices of agricultural products and other basic commodities in the consumer market basket,” he added.

Moody’s Analytics economist Sarah Tan and Reyes Tacandong & Co. senior adviser Jonathan Ravelas, meanwhile, both estimated slightly higher 2.7-percent inflation for December.

“The acceleration from November’s 2.5 percent will be driven by higher price pressures in the food and electricity categories,” Tan said.

She noted that flooding from six storms between late October and November had damaged key crops, including rice and lowland vegetables. Additionally, electricity rates rose after Manila Electric Co. raised generation charges, while fuel prices also climbed in December.

Ravelas also cited rising food, fuel and electricity costs as having driven inflation up, “influenced by a weaker currency and weather-related disruptions.”

With the highest forecast, Pantheon Macroeconomics economist Miguel Chanco said he expected inflation to have hit 2.9 percent last month due to rising food prices, but said that “softer readings” could follow.

Inflation stayed below 4.0 percent for most of 2024 — it fell to as low as 1.9 percent in September — except for a 4.1-percent result in July due to high rice prices.

The easing from 2023 allowed the BSP’s policymaking Monetary Board to reduce key interest rates by 75 basis points (bps) last year, although rising risks have lessened the prospects of how many more cuts could be ordered in 2025.

The central bank’s benchmark rate currently stands at 5.75 percent and many analysts now expect just 75 bps of cuts this year from 100 bps previously.

During its last policy meeting on Dec. 19, the Monetary Board said that Inflation was likely to stay within the target range in the near term, but added that the balance of risks continued to “lean to the upside” due to potential fare hikes and higher electricity prices.

“The impact of lower import tariffs on rice remains the main downside risk to inflation,” it also said.

The risk-adjusted inflation forecast for 2025 was raised to 3.4 percent from 3.3 percent while that for 2026 was kept unchanged at 3.7 percent.

It noted that domestic demand was likely to remain firm, but subdued, given factors such as easing inflation, an improving labor market, and external downside risks.

On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” the central bank said.

“Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors.”

The Monetary Board will hold its first rate-setting meeting for 2025 on Feb. 20.