Housing, utilities push inflation to 11-mo high
Philippine inflation picked up again in January, exceeding the pace expected by market consensus, as higher housing and utilities costs pushed consumer prices upward.
The Philippine Statistics Authority (PSA) reported on Thursday that inflation in the first month of the year had risen to 2 percent from 1.8 percent in December. This brought inflation back to the 2 percent to 4 percent target range of the Bangko Sentral ng Pilipinas (BSP) for the first time since February 2025, when it stood at 2.1 percent.
While the latest print was at the low end of the target range, it was higher than the 1.8-percent median estimate of 15 economists surveyed by the Inquirer last week.
Even so, it was still within the BSP’s 1.4 percent to 2.2 percent forecast range for the month.
According to the PSA, the main source of the upswing came from housing, water, electricity, gas and other fuels, which posted an inflation rate of 3.3 percent, up from 2.5 percent in the previous month. This was also the highest since August 2024.
Much of the pressure was driven by electricity costs, which accelerated to 6.5 percent from 4 percent a month earlier. Rent, meanwhile, rose to 2.9 percent from 2.4 percent.
Rent escalation
Overall, housing and utilities costs accounted for 45.9 percent of the uptick.
National Statistician Claire Dennis Mapa said the faster increase in rental prices was likely due to landlords adjusting rates at the start of the year and could remain elevated in the coming months.
This reason was echoed by Rizal Commercial Banking Corp. chief economist Michael Ricafort.
“Seasonal decrease in demand upon crossing the new year in January 2026 after the Christmas holiday-related spending could have been offset by any start-of-the-year upward adjustments in contracts and other product/service prices, such as rental rates and other services,” Ricafort said.
Another contributor to the uptick, accounting for much of the remaining share, was the index for restaurants and accommodation services, whose inflation rate jumped to 4 percent from 2.4 percent in December.
The increase in these two baskets negated the slowdown in food inflation, which eased to 0.7 percent from 1.2 percent in the previous month, when it was the main source of price hikes.
This was due to slower inflation for vegetables, which Mapa said could be attributed to the end of the typhoon season, with prices likely to normalize in the coming months.
“Whether it will breach 4 percent, it’s too early to say. But, we expect that there are risks, especially in food costs. Rice inflation is still negative but prices are adjusting upward compared to 2025,” Mapa said during a press conference.
Prices of food bought outside households have risen, Mapa noted, alongside housing, electricity and other fuel costs.
Further rate cuts?
Now, coupled with weak economic growth, the faster inflation rate may influence the central bank’s decision on whether further rate cuts are warranted. The BSP’s next rate-setting meeting is scheduled for Feb. 19.
“It is important to note that the headline inflation is back to the lower end of the BSP target inflation range, but is still considered relatively benign,” Ricafort said.
”Nevertheless, that could still support monetary easing measures such as cuts in local policy rates and banks’ reserve requirement ratio, as part of the policy priorities to boost economic growth. However, the BSP reiterated that it is nearing the end of its monetary policy easing cycle,” he added.
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