By Luisa Maria Jacinta C. Jocson, Reporter
HEADLINE INFLATION may have quickened in December amid higher prices of food and utilities, but full-year inflation likely settled within the 2-4% target band, analysts said.
A BusinessWorld poll of 13 analysts yielded a median estimate of 2.7% for the consumer price index (CPI) in December.
This is within the 2.3%-3.1% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.
If realized, December inflation would have been faster than the 2.5% in November but slower than the 3.9% in the same month in 2023.
December would also mark the third straight month that inflation accelerated on a monthly basis.
The Philippine Statistics Authority (PSA) is set to release December and full-year inflation data on Jan. 7.
“We estimate that inflation rose to 2.7% in December from 2.5% in the previous month, which would bring the full-year inflation rate to 3.2% for 2024,” Chinabank Research said.
“We expect inflation to lift 2.7% year on year in December, bringing the full-year inflation to 3.2%,” Sarah Tan, an economist from Moody’s Analytics, said.
Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said that food inflation was still likely the main contributor to the overall CPI in December.
“The acceleration from November’s 2.5% will be driven by higher price pressures in the food and electricity categories,” Ms. Tan said.
She said this was due to the damage from typhoons that hit the country from late October to November.
“These storms came after the typical peak typhoon season that lasted till October. Lowland vegetables and rice were some of the hardest hit crops as the typhoons swept across key farming areas,” she said.
“The overall impact on food production will continue to show up in December’s inflation print,” she added.
The Philippines saw six typhoons entering its Area of Responsibility in November, according to the Philippine Atmospheric, Geophysical, and Astronomical Services Administration.
“We observed higher prices for some key food items such as vegetables and fish, along with increases in electricity rates and costs of LPG and petroleum,” Chinabank Research said.
Mr. Taningco said hikes in electricity rates and pump prices may have also contributed to the inflation print in December.
In December, pump price adjustments stood at a net increase of P1.40 a liter for gasoline and P1.45 a liter for diesel. However, kerosene prices had a net decrease of P0.80 a liter.
Meanwhile, Manila Electric Co. (Meralco) raised the overall rate by P0.1048 per kilowatt-hour (kWh) to P11.9617 per kWh in December from P11.8569 in November.
Oikonomia Advisory & Research, Inc. economist Reinielle Matt Erece also noted the impact of holiday spending on December inflation.
“The slight uptick in December CPI may have come from seasonal demand largely from the broad food items, particularly ‘noche buena’ food stuff, that would historically have cyclical upticks,” Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., said.
FULL-YEAR WITHIN TARGETDespite the faster inflation in December, full-year inflation is seen to settle firmly within the 2-4% target.
“We are still confident that despite this uptick, the full-year inflation will be around 3.2% which is still within the BSP’s targets,” Mr. Erece said.
The BSP expects inflation to average 3.2% in 2024.
It also expects inflation to remain within target from 2025 to 2026. Its baseline and risk-adjusted forecasts for both years are seen to settle within the 2-4% band.
“Looking ahead, we expect inflation to remain within the BSP’s 2-4% target range, supported by lower tariffs on rice imports,” Chinabank Research said.
“Average inflation for 2024 is at the midpoint of the BSP’s inflation target, and we expect 2025 inflation to be slower at 3% at this point,” Mr. Asuncion said.
This would help pave the way for continued monetary easing in 2025, he added.
“For the coming months, it is possible for inflation to sustain at 2% levels up to early 2025, or well within the BSP inflation target range of 2-4%, that could justify further BSP rate cuts,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Mr. Taningco said that the central bank will likely employ a “gradual pace” of rate cuts.
In 2024, the BSP has delivered a total of 75 basis points (bps) of rate cuts since it kickstarted its easing cycle in August.
“We expect monetary policy easing to continue in 2025. However, BSP will be prudent in monitoring global developments that could reinflate inflation and weaken the strength of the peso,” Ms. Tan said.
In 2024, the peso closed at its record low of P59 thrice (on Nov. 21, Nov. 26, and Dec. 19.) as the dollar surged on bets of slower rate cuts by the US Federal Reserve amid inflation concerns.
Sun Life Investment Management and Trust Corp. economist Patrick M. Ella said he forecasts a total of 75 bps worth of rate cuts in increments of 25 bps in 2025.
“We are now looking at three cuts for the BSP (75 bps) instead of a previous forecast of four cuts (100 bps). We do not see them cutting with the Fed but more in line with domestic data developments,” he said.
The central bank will likely keep reducing rates in “baby steps” as it is still carefully monitoring upside risks to inflation, he added.
RISKSAnalysts likewise cited risks that could delay the BSP’s rate-cutting cycle.
“For one, the prospect of tariffs from the US looms large, and the pace of global interest rate normalization is likely to slow. These will play into the BSP’s decision to loosen monetary policy further (in 2025),” Ms. Tan said.
“However, there are upside risks in the horizon, particularly on the uncertain impacts of the Trump administration on local inflation including overseas Filipino worker (OFW) remittances (in 2025),” Mr. Asuncion said.
Mr. Erece also noted the need to take into account the US Federal Reserve’s own policy moves.
“This inflation print being within their targets and the need to boost economic growth may be the central bank’s signal to continue their monetary policy easing,” he said.
“However, it is in the BSP’s best interest to closely monitor the Fed’s stance with their own monetary policy.”
The Fed aggressively cut rates in September, November and December, but in their last meeting flagged fewer rate cuts for 2025.
“There is a possibility that the Fed may switch to a hawkish stance as inflation continues to linger and if Trump pushes through with his economic reforms such as increases in tariffs, leading to less rate cuts,” Mr. Erece said.
“This can cause further appreciation in the value of the US dollar and may push the BSP to recalibrate their monetary policy easing path to avoid the peso from depreciating quickly through less or smaller rate cuts as well,” he added.
