The country's headline inflation further eased in January as the food prices continued to stabilize, the Philippine Statistics Authority said on Tuesday, likely reducing pressure on the central bank to hike or keep interest rates high.

Data from PSA showed that the country's inflation rate significantly slowed to 2.8 percent in January 2024 from 3.9 percent in December 2023.

"This is the lowest inflation rate since the 2.3 percent inflation rate recorded in October 2020," National Statistician Dennis Mapa said in a briefing.

Headline inflation, or the general movement of prices for goods, also further eased from 8.7 percent in the same period last year.

The headline inflation rate matched the 2.8 percent forecast in a Daily Tribune poll, and was the second consecutive month that it fell within the central bank's 2.0 percent to 4.0 per cent target range.

Core inflation, excluding the volatile costs of food and energy, decelerated to 3.8 percent in January from 4.4 percent in the preceding month.

Contributors

PSA noted slower inflation across 10 out of the 12 subsectors, with food inflation moderating to 3.5 percent year-on-year from 5.4 percent, and transport inflation reporting negative inflation at -0.3 percent year-on-year.

Mapa attributed the slower food inflation rate to the decrease in the prices of corn, oils and fats, meat, and sugar.

While food inflation has slowed down, Mapa said rice inflation has increased to 22.6 percent year-on-year as the continuing El Nino weather phenomena continued to hinder local output.

According to Mapa, this has been the highest since March 2009 with 22.9 percent.

Meanwhile, other expenses that also contributed to the downward trend in inflation include housing, water, electricity, gas, and other fuels: from 1.5 percent in December to 0.7 percent in January.

Base effects

Comparably, the Bangko Sentral ng Pilipinas (BSP) stated that the recent deceleration is in line with its projections that inflation will probably decline in the first quarter of 2024 "due to largely to negative base effects" and concurrently experience "some easing of supply constraints affecting key commodities."

"However, inflation could temporarily accelerate above the target range from Q2 2024 due to the impacts of El Niño weather conditions and positive base effects,” BSP said in a statement.

In a separate statement, Budget Secretary Amenah Pangandaman said the recent decline in inflation is "good news" for the Philippines, highlighting positive implications for businesses and the government's development agenda.

"This means that businesses have a greater opportunity to thrive while the government can focus on areas of growth and development," Pangandaman said.

She further emphasized the positive economic outlook, stating, "Overall, with lower inflation and lower unemployment rates, we are off to a very good start this 2024, towards high and sustained growth."

Pangandaman attributed the progress to the effectiveness of the administration's economic policies, despite facing challenges like global headwinds and climate change.