January inflation seen holding at 1.8%

By Katherine K. Chan, Reporter

PHILIPPINE INFLATION likely held steady in January as lower electricity charges and easing vegetable prices helped offset pressures from higher food and fuel costs and a weaker peso, economists said ahead of official data.

A BusinessWorld survey of 18 economists yielded a median forecast of 1.8% for the January consumer price index, within the Bangko Sentral ng Pilipinas’ (BSP) 1.4% to 2.2% projection for the month. That means inflation would be unchanged from December and slower than 2.9% a year earlier.

“Headline inflation likely remained steady at 1.8% year on year in January, implying a 0.5% month-on-month increase, as food and energy pressures offset easing utility and vegetable costs,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said in a commentary.

January would also mark the 11^th straight month that inflation stayed below the BSP’s 2% to 4% target, reinforcing the view that price pressures remain subdued despite a volatile peso and higher global energy prices.

The Philippine Statistics Authority is set to release January inflation data on Feb. 5.

Fuel prices rose during the month, adding to inflationary pressure. Pump price adjustments in January resulted in a net increase of P1.60 per liter for gasoline, P3.80 for diesel and P2.70 for kerosene, according to industry data.

These increases were partly offset by lower electricity rates. Manila Electric Co. cut power prices by P0.1637 per kilowatt-hour (kWh) to P12.9508 in January from P13.1145 in December. Households consuming 200 kWh paid about P33 less on their monthly electricity bills. 

Currency movements also influenced price dynamics. The peso weakened sharply in mid-January, briefly hitting record lows against the dollar, which raised concerns over imported inflation.

“A relatively higher US dollar-peso exchange rate in recent months amid political noise could have partly led to higher import costs and overall inflation,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The peso slid to an all-time low of P59.46 a dollar on Jan. 15 before recovering modestly. It closed at P58.86 on Friday, according to Bankers Association of the Philippines data posted on its website.

Rice prices, a major driver of inflation, fell from a year earlier but rose slightly from December, signaling a slower decline. The government reopened the market to imported rice on Jan. 1 after a four-month ban imposed in September.

Data from the Bureau of Plant Industry showed rice imports totaled about 248,000 metric tons from Jan. 1 to Jan. 22, nearing the 279,000 metric tons brought in during the entire month of January last year.

“The pace of rice price declines is likely to slow as imports resumed after the government’s import restriction expired in December,” Moody’s Analytics Assistant Director and economist Sarah Tan said in an e-mailed reply to questions. “At the same time, a weaker peso has pushed up import costs, limiting further disinflation in rice prices in January.”

Ms. Tan expects inflation to settle at about 2% for the month.

In mid-January, the average retail price of regular milled rice fell 9.56% year on year to P43.52 per kilo but rose 3.37% from December levels, Philippine Statistics Authority data showed.

Well-milled rice fell 9.13% annually to P50.06 per kilo while increasing 1.07% month on month. Special rice dropped 4.68% from a year earlier but climbed almost 2% from December.

Other economists pointed to improved weather conditions as a counterweight to food price pressures. HSBC Global Investment Research ASEAN economist Aris D. Dacanay said inflation might have eased slightly to 1.7% in January.

“Food prices, particularly vegetables, moderated after [December’s] surge,” he said in an e-mailed reply to questions, adding that supply conditions might have normalized after favorable weather.

Most analysts expect inflation to move back toward the middle of the BSP’s target later this year. Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion said unusually low food and rice inflation last year had largely dissipated.

“As a result, we anticipate headline inflation to rise back above 2% starting February, as rice deflation narrows and food prices begin normalizing from last year’s very low base,” he added.

Metropolitan Bank & Trust Co. (Metrobank) said rental inflation began rebounding late last year following an oversupply of condominium units after the online gaming boom, a trend that may persist through 2026 and add modest upward pressure to inflation.

“Given these, inflation could remain positive but moderate,” Metrobank research officers Maria Kaila Balite and Joaquim Pantanosas said in a report. “Low base effects, however, could bring rental inflation higher before normalizing, putting upward pressure on the headline figure.”

RATE CUT
The relatively benign inflation outlook, coupled with subdued economic growth, has strengthened expectations for further policy easing. BSP Governor Eli M. Remolona, Jr. on Sunday said the central bank could deliver a sixth straight 25-basis-point rate cut if the fourth-quarter GDP slowdown proves demand-driven.

“If we can help on the demand side and still keep inflation low, then of course we’ll help,” he told reporters in Dumaguete City.

He said the Monetary Board is still reviewing whether the slowdown stemmed from weak demand or supply constraints.

Despite these risks, subdued price growth and weak economic momentum have strengthened expectations of further policy easing. Mr. Neri said the inflation backdrop supports another rate cut at the central bank’s next meeting.

The Monetary Board lowered interest rates five times in 2025, bringing the benchmark rate to 4.5%.

Meanwhile, Mr. Remolona said the central bank could revise its 2026 growth forecast but still expects the economy to rebound in the second half.

“We’re looking to revise that. I hope we don’t revise it [downward],” he said.

He added that the BSP is seeking better data on public sector activity through its expectations survey, particularly as public investment slowed in the fourth quarter.

He earlier said policymakers would weigh inflation trends, growth data and US Federal Reserve policy signals when they meet on Feb. 19.