Inflation Rises in the Philippines, Yet Aligns with BSP Expectations

In December, inflation in the Philippines rose above expectations; however, it sharply fell compared to the previous year, in line with the forecasts of the Bangko Sentral ng Pilipinas (BSP) and maintaining the rationale for further interest rate cuts.

The Philippine Statistics Authority (PSA) announced that headline inflation increased by 2.9% compared to the same period last year. This is a significant rise compared to the 2.5% in November and the economists' projected increase of 2.6%.

The December data brought the annual average inflation rate for 2024 down to 3.2% compared to 6.0% in 2023. The PSA noted that prices last month predominantly rose due to housing, water, electricity, gas, and other fuels.

The BSP had estimated December inflation to be between 2.3% and 3.1%, resulting in an annual inflation average of 3.2%. The annual result is quite close to the midpoint of BSP's inflation target range of 2% to 4%.

The BSP anticipated that inflation in December would be driven by increased food prices due to supply disruptions from recent weather events, as well as higher electricity and fuel prices.

Core Consumer Price Index (CPI), excluding private road transport and accommodation costs, increased by 2.8% last month compared to a 2.5% increase in November.

To stimulate the economy in the context of slowing economic growth and low inflation, the BSP cut the policy rate three times in 2024.

The PSA reported a monthly increase of 0.6% in consumer prices in December.