<\/a><\/p>\nShould this prediction hold true, December inflation would surpass the 2.5% recorded in November, yet would be slower than the 3.9% noted in the equivalent month of 2023.<\/p>\n
Furthermore, December would signify the third consecutive month of monthly inflation acceleration.<\/p>\n
The Philippine Statistics Authority (PSA) is scheduled to unveil December and full-year inflation statistics on January 7.<\/p>\n
\u201cOur estimate indicates that inflation rose to 2.7% in December from 2.5% in the prior month, likely resulting in a full-year inflation rate of 3.2% for 2024,\u201d stated Chinabank Research.<\/p>\n
\u201cWe project inflation to rise 2.7% year on year in December, resulting in a full-year inflation rate of 3.2%,\u201d articulated Sarah Tan, an economist from Moody\u2019s Analytics.<\/span><\/p>\nAngelo B. Taningco, Vice-President and Head of Research Division at Security Bank Corp., indicated that food inflation would likely remain the primary factor influencing the total CPI in December.<\/span><\/p>\n\u201cThe increase from November\u2019s 2.5% will be spurred by heightened price pressures in the food and electricity sectors,\u201d Ms. Tan noted.<\/p>\n
She elaborated that this was a consequence of the devastation wrought by typhoons that impacted the nation from late October through November.<\/p>\n
\u201cThese storms occurred following the usual peak typhoon period, which lasted until October. Lowland vegetables and rice were among the crops most severely affected as the typhoons traversed crucial agricultural zones,\u201d she explained.<\/p>\n
\u201cThe overall effect on food production will persist, influencing December\u2019s inflation results,\u201d she added.<\/span><\/p>\nAccording to the Philippine Atmospheric, Geophysical, and Astronomical Services Administration, six typhoons entered the Philippines’ Area of Responsibility in November.<\/span><\/p>\n\u201cWe observed rising prices for select key food items, including vegetables and fish, along with increases in electricity tariffs and the costs of LPG and petroleum,\u201d Chinabank Research reported.<\/p>\n
Mr. Taningco mentioned that increases in electricity fees and fuel prices may have also played a role in the December inflation figures.<\/p>\n
In December, fuel price adjustments yielded a net increase of P1.40 per liter for gasoline and P1.45 per liter for diesel. Conversely, kerosene prices showed a net decrease of P0.80 per liter.<\/p>\n
Furthermore, Manila Electric Co. (Meralco) raised the overall rate by P0.1048 per kilowatt-hour (kWh) to P11.9617 per kWh in December, up from P11.8569 in November.<\/p>\n
Oikonomia Advisory & Research, Inc. economist Reinielle Matt Erece also highlighted the effect of holiday expenditures on December inflation.<\/p>\n
\u201cThe minor increase in December CPI might stem from seasonal demand, particularly for the wide range of food items, notably \u2018noche buena\u2019 delicacies, which typically experience cyclical upticks,\u201d stated Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc.<\/p>\n
FULL-YEAR WITHIN TARGET
\n<\/b>Despite the acceleration of inflation in December, full-year inflation is anticipated to firmly remain within the 2-4% target.<\/p>\n
\u201cWe remain optimistic that in spite of this uptick, the full-year inflation will hover around 3.2%, still within the BSP\u2019s targets,\u201d indicated Mr. Erece.<\/p>\n
The BSP predicts that inflation will average 3.2% in 2024.<\/p>\n
Moreover, it anticipates inflation to stay within the target from 2025 to 2026, with baseline and risk-adjusted forecasts for both years expected to remain in the 2-4% range.<\/span><\/p>\n\u201cLooking forward, we foresee inflation persisting within the BSP\u2019s 2-4% target range, backed by reduced tariffs on rice imports,\u201d Chinabank Research remarked.<\/p>\n
\u201cThe average inflation for 2024 is projected at the midpoint of the BSP\u2019s inflation target, with expectations of slower inflation at 3% for 2025,\u201d Mr. Asuncion stated.<\/p>\n
This would facilitate continued monetary easing in 2025, he further noted.<\/p>\n
\u201cIn the forthcoming months, inflation could sustain at around 2% levels through early 2025, comfortably within the BSP\u2019s inflation target range of 2-4%, which might justify additional BSP rate reductions,\u201d claimed Michael L. Ricafort, Chief Economist at Rizal Commercial Banking Corp.<\/p>\n
According to Mr. Taningco, the central bank is likely to adopt a \u201cgradual pace\u201d for rate cuts.<\/span><\/p>\nIn 2024, the BSP has implemented a total of 75 basis points (bps) in rate reductions since initiating its easing cycle in August.<\/p>\n
\u201cWe anticipate that monetary policy easing will persist into 2025, although the BSP will remain cautious in monitoring global developments that could rejuvenate inflation and weaken the peso’s value,\u201d Ms. Tan remarked.<\/p>\n
In 2024, the peso checked in at a record low of P59 on three occasions (November 21, November 26, and December 19) as the dollar surged due to expectations of slower rate cuts by the US Federal Reserve, amidst inflation worries.<\/p>\n
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., projected a total of 75 bps worth of rate cuts in increments of 25 bps for 2025.<\/p>\n
\u201cWe are currently considering three cuts for the BSP (75 bps), rather than our prior forecast of four cuts (100 bps). We do not foresee them aligning with the Fed but rather responding to domestic data developments,\u201d he stated.<\/p>\n
The central bank is likely to continue reducing rates incrementally, as it is still cautiously observing potential upward risks to inflation, he added.<\/p>\n
RISKS
\n<\/b>Analysts also pointed out risks that could postpone the BSP\u2019s rate-cutting schedule.<\/p>\n
\u201cFor starters, the potential for tariffs from the US looms large, alongside the likelihood that global interest rate normalization will decelerate. These factors will influence the BSP\u2019s decision to further loosen monetary policy (in 2025),\u201d stated Ms. Tan.<\/p>\n
\u201cNonetheless, there are upward risks on the horizon, particularly concerning the unpredictable effects of the Trump administration on local inflation, including remittances from overseas Filipino workers (OFWs) (in 2025),\u201d remarked Mr. Asuncion.<\/p>\n
Mr. Erece further emphasized the need to consider the actions of the US Federal Reserve.<\/p>\n
\u201cThis inflation print being consistent with their targets while the necessity to boost economic growth may signal to the central bank to persist with their monetary policy easing,\u201d he stated.<\/p>\n
\u201cHowever, it is paramount for the BSP to closely observe the Fed\u2019s position alongside its own monetary strategies.\u201d<\/p>\n
The Fed made significant rate cuts in September, November, and December, but in their latest meeting indicated fewer rate cuts are expected in 2025.<\/p>\n
\u201cThere’s a possibility that the Fed may shift to a hawkish approach as inflation remains persistent, particularly if Trump proceeds with his economic reforms such as tariff increases, leading to fewer rate cuts,\u201d cautioned Mr. Erece.<\/span><\/p>\n\u201cThis could trigger further strengthening of the US dollar’s value and may compel the BSP to reassess its monetary policy easing trajectory to prevent rapid depreciation of the peso through limited or smaller rate cuts,\u201d he added.<\/p>\n
\n
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