Inflation skids to a surprise 5-month low in February 2025
Inflation eased more than expected in February to hit a five-month low driven by easing price pressures from food, utilities and transportation.
However, it remains to be seen if such a development is enough to spur another interest rate cut as the central bank remains wary of global uncertainties.
Inflation, as measured by the consumer price index (CPI), sharply slowed to 2.1 percent from 2.9 percent in the preceding month, the Philippine Statistics Authority (PSA) reported on Wednesday.
Data showed this was the softest CPI reading since September 2024, when inflation was at 1.9 percent. This put the average price growth in the first two months of the year at 2.5 percent, well within the official target of 2 to 4 percent.
Overall, the February figure was much better than the 2.6-percent projection of 14 economists polled by the Inquirer last week.
At the same time, the latest CPI print settled near the low-end of the 2.2 to 3-percent forecast range of the Bangko Sentral ng Pilipinas (BSP).
Dissecting the PSA’s report, food price inflation—which eased to 2.6 percent from 3.8 percent in the previous month —was the main reason for the slower price gains in February.
“The government will sustain its efforts to keep inflation low and manageable to protect the purchasing power of Filipinos,” Secretary Arsenio Balisacan of the National Economic and Development Authority said.
Notably, rice price inflation had contracted by 4.9 percent, the steepest slump since April 2020 when the cost of the staple grain had fallen by 5.7 percent. The rice deflation was enough to offset the still elevated 7.1-percent CPI for vegetables, which nevertheless retreated from the 21.1 percent before.
At a press conference, Deputy National Statistician Divina Gracia Del Prado said there were some indications that the typhoon-induced food supply shocks might have started to wane.
“We’re still feeling the impact of the typhoons because vegetable prices are still high. But it’s not as much as before,” Del Prado said.
The second driver of slower-than-expected inflation last month was the milder cost increases in utilities, which moderated to 1.6 percent from 2.2 percent before amid cheaper electricity costs.
Finally, transport—which had also fallen into deflation at 0.2 percent in February—was the next major contributor to the overall deceleration after the CPI for gasoline and diesel contracted by 4.7 percent and 3.4 percent, respectively.
Enough to justify easing?
That price gains had stayed within the 2 to 4 percent official target means the BSP has enough room to continue with its gradual easing cycle, which would help support economic growth.
But the timing of the next interest rate cut remains the talk of the market.
At its first policy meeting for this year last month, the central bank decided to keep the benchmark rate that banks typically use as a guide when pricing loans untouched at 5.75 percent.
The move defied market expectations, with Governor Eli Remolona Jr. admitting that it was not an easy decision for monetary authorities, who were wary of global trade developments and the different kinds of uncertainty they bring.
In a commentary, analysts at Chinabank Research said global uncertainties would likely stay as the biggest risk to the central bank’s rate-cutting cycle.
“We think the low inflation print in February and the outlook for within-target inflation support the case for a BSP rate cut, though uncertainties on global policy, particularly on trade, still call for continuing caution,” they said.
Jonathan Koh, economist at Standard Chartered Bank, said the lower-than-consensus February inflation might not fully convince the BSP to resume trimming borrowing costs at its April meeting.
“We do not think that today’s lower inflation print necessarily bolsters the case for the BSP to cut earlier in April –– the key reason for the pause in February was external uncertainty. Growth and inflation fundamentals already pointed towards further easing,” Koh said.
