Inflation likely stayed at 1.8 percent year-on-year in January, according to both the Bangko Sentral ng Pilipinas (BSP) and the Bank of the Philippine Islands (BPI), keeping price pressures well within the central bank’s target range and strengthening the case for an interest rate cut.
The BSP said higher prices of food and fuel, particularly rice, fish, and cooking gas, likely pushed prices up by about 0.5 percent month-on-month, but these were offset by lower electricity rates and cheaper vegetables, leaving overall inflation unchanged from December. Rice prices have risen for three straight months due to weaker harvests caused by bad weather and higher fertilizer costs, while a rebound in global oil prices lifted local fuel and LPG prices.
BPI echoed this view, also projecting 1.8 percent inflation for January, noting that food and energy pressures were balanced by easing utility and vegetable costs. BPI added that global oil prices’ recovery and supply-related issues in agriculture were key drivers of the monthly increase.
Looking ahead, both BSP and BPI expect inflation to gradually rise through 2026 as last year’s sharp drop in rice prices fades from the comparison base. Even so, inflation is still projected to remain within the BSP’s target, suggesting price pressures will stay manageable.
With inflation under control and economic growth slowing sharply, the outlook supports a possible BSP rate cut as early as February 19 when the rate-setting monetary board of the BSP meets again to decide whether the policy levers need calibration. Fourth-quarter GDP growth slowed to 3 percent, well below potential, pointing to weak domestic demand. While the US Federal Reserve is expected to keep rates unchanged for now, the BSP may move ahead to support the local economy.
This potential policy divergence, combined with softer growth at home, is expected to keep downward pressure on the peso, even as inflation remains stable.
