The Bangko Sentral ng Pilipinas, or BSP, maintained its policy rate at 6.5 percent as it expects fuel, food and electricity prices to remain relatively high.

Accordingly, the BSP also kept its interest rates unchanged for overnight deposit at 6 percent and lending facilities at 7 percent.

“The risks to the inflation outlook have receded but remain tilted toward the upside. In consideration of the prevailing risks, the BSP Monetary Board deems it appropriate to keep the BSP’s monetary policy settings unchanged in the near term amid the improvement in inflation conditions,” the central bank said.

Inflation continued to slow in January at 2.8 percent from 6.1 percent in September last year, according to the Philippine Statistics Authority.

However, the BSP said inflationary risks from higher power rates and transport charges still exist.

“These are based on the petitions for increases in jeepney, MRT-3 and taxi fares. The risk of higher oil prices is due to the escalation of tensions in the Middle East, arising from the Israel-Hamas conflict and the recent Yemen attacks in the Red Sea,” BSP director for economic research Dennis Lapid said.

Limiting El Niño

Lapid said the BSP is also monitoring food prices as El Niño is expected to limit agricultural production in the first quarter of the year.

Citing the BSP survey among economists, Lapid said possible higher wages for workers outside Metro Manila also threaten to push up the inflation rate.

Lapid said inflation rates will decline in the second and next quarters mainly due to the mathematical principle of negative base effects and improvement in weather conditions.

For this year, the BSP expects risk-adjusted inflation to ease to 3.9 percent based on its meeting this month from the 4.2 percent estimated in its meeting last December.

For 2025, the BSP sees a steady inflation of 3.5 percent from 3.4 percent.

These figures are similar to the latest projections of external analysts surveyed by the BSP from 6 to 12 February.

The BSP expects inflation rates to decline in the second and next quarters due to the mathematical principle of base effects and El Niño mitigation measures by the government.