Inflation seen to stay on target thru 2025
Inflation would likely stay benign for the rest of the year barring any major shocks, creating the perfect condition for consumption growth to gain more momentum, analysts said.
In a commentary, economists at Chinabank Research said a target-consistent inflation would boost the case for additional rate cuts by the Bangko Sentral ng Pilipinas (BSP), which can further support household spending.
But Chinabank said there are certain risks that would warrant a “cautious” relaxation of financial conditions.
“This year, we estimate that monthly and full-year inflation prints will remain within the BSP’s 2- to 4-percent target, barring any unexpected shocks,” Chinabank said.
“This should provide room for further interest rate cuts by the BSP, though increased global uncertainty and persisting upside risks to the inflation outlook (e.g., adverse weather and geopolitical tensions) would continue to support a cautious approach to policy easing,” it added.
Inflation, as measured by the consumer price index (CPI), was steady at 2.9 percent in January, although it was higher than the 2.8-percent median estimate in an Inquirer poll.
Nevertheless, the January CPI settled within the 2.5-percent to 3.5-percent forecast range of the central bank. It also marked another month of benign inflation after staying within the 2- to 4-percent target range of the BSP.
Data showed a decline in rice prices—a first in over three years—and slower increase in utility costs curbed the typhoon-induced jump in food price growth.
Miguel Chanco, economist at Pantheon Macroeconomics, said inflation “should start to move sideways from here.”
“Our forecast implies that headline inflation should remain relatively steady from here on out, ranging between 2.5 to 3 percent for the remainder of this year, comfortably within the BSP’s target range,” Chanco said.
“The mean reversion upwards in food inflation should soon hit a ceiling, with related upstream price pressures continuing to subside,” he added.
Separately, BMI Research said it holds a positive outlook for consumer spending in the Philippines in 2025 driven mostly by a strong economic growth and its feed-through into higher disposable income, as well as a stable labor market.
“Spending will remain influenced by the elevated inflationary pressures seen over 2025 as well as currently high debt levels, along with related debt servicing costs,” BMI said.
“A tight labor market will support spending, as real wage growth returns to positive territory, which will support purchasing power,” it added.
