1 month ago
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The Bangko Sentral ng Pilipinas (BSP) is projecting inflation rate for the month of January could hit a low of 2.5 percent versus December’s actual 2.9 percent, or a high of 3.3 percent due to upward price pressures.
In a statement on Friday, Jan. 31, the BSP said the January consumer price index (CPI) may be higher than the previous month’s 2.9 percent because of the increase in petroleum prices as well as the higher prices of major food items due to the impact of weather disturbances.
Adjustments to the water rates and sin taxes are also considered upward price pressures.
“These upward price pressures are expected to be offset in part by lower prices of rice and electricity rates,” said the BSP. The government will release the January CPI on Feb. 5.
The BSP’s latest baseline inflation forecast for 2025 is 3.3 percent while its risk-adjusted projection is 3.4 percent – both are within the government inflation target of two percent to four percent.
The central bank estimates are higher compared to private sector economists’ forecast of an average inflation of 3.1 percent for this year.
In 2024, the inflation full-year average was at 3.2 percent, lower than 2023’s six percent.
The BSP said the 2024 inflation outturn remains consistent with its assessment of a manageable inflation environment over the policy horizon, but they will continue to closely monitor emerging upside risks to inflation.
After cutting the policy rate by a cumulative 75 basis points last year, which reduced the target reverse repurchase rate from 6.5 percent to 5.75 percent, the BSP is maintaining a measured approach to monetary policy easing in support of growth.
Meanwhile, based on the December 2024 BSP Survey of External Forecasters, 24 economists expect that for the first quarter this year, inflation will likely average at 2.6 percent, and higher at 2.9 percent for the second quarter.
About 18 out of 24 analysts said there is a 82.6 percent chance that inflation will settle within the target band this year, while a smaller probability or 13.6 percent of economists said inflation will breach the upper end of the target range.
Generally, economists agree with the BSP that inflation will be low and manageable in the next two years amid broadly-balanced risks.
According to the central bank’s Monetary Policy Report, from the second half of 2025 to the first half of 2026, the BSP projects inflation will likely climb close to the upper end of the two percent to four percent target due to the lagged impact of higher minimum wages and positive base effects.
By the second half of 2026, inflation could ease closer to the midpoint, supported by a continued decline in global commodity prices, said the BSP.
