Inflation rises in January; BSP rate cut imminent

Inflation rises in January; BSP rate cut imminent | Daily Tribune

Headline inflation rose to 2.0 percent at the start of 2026, according to the Philippine Statistics Authority (PSA).

In a Thursday morning press release, the PSA said headline inflation increased by 0.2 percentage points from December’s 1.8 percent, primarily influenced by faster annual increases in the prices of housing, water, electricity, gas and other fuels.

The PSA defines headline inflation as the year-on-year percentage change in the prices of goods and services over a given period. This is computed using the Consumer Price Index (CPI) for all income households, covering all commodity groups included in the CPI basket.

The CPI, in turn, consists of a fixed basket of goods and services representing typical household spending. Based on the PSA’s Family Income and Expenditure Survey, the CPI identifies commonly purchased items and assigns weights based on their relative spending shares in Filipino households.

The PSA said the top three commodity groups contributing to the January 2026 overall inflation rate were housing, water, electricity, gas, and other fuels; food and non-alcoholic beverages; and restaurants and accommodation services.

Meanwhile, food inflation declined by 0.5 percentage points from the previous month, settling at 0.7 percent in January. The downtrend was mainly driven by slower annual price increases for vegetables, tubers, plantains, cooking bananas and pulses, which rose by 3.3 percent during the month, sharply lower than 11.6 percent in December 2025.

Food prices ease

The Department of Economy, Planning and Development (DEPDev) welcomed the easing of food prices, citing its benefit to household purchasing power, particularly for lower-income families.

“We see the easing of food inflation as beneficial for Filipino households, particularly for lower-income families where food accounts for a larger share of expenditures,” said DEPDev Undersecretary and officer-in-charge Rosemarie G. Edillon.

“We will continue building on this progress by sustaining efforts to support Filipino families’ purchasing power, alongside reforms that strengthen resilience and promote long-term growth,” she added.

With the release of January inflation data, the 2.0 percent rate marks the first time since February last year that inflation has settled within the government’s 2 to 4 percent target range.

Same target range maintained till 2027

Secretary Arsenio Balisacan previously said the government will maintain the same target range through 2027.

Headline inflation is also a key factor in the Bangko Sentral ng Pilipinas’ (BSP) decision on whether to further cut the target reverse repurchase rate (RRP).

The BSP’s Monetary Board reduced the RRP on 11 December following an economic slowdown caused mainly by reduced public infrastructure investment linked to the flood control scandal.

The Board will reconvene on 19 February to discuss monetary policy and the government’s reform initiatives aimed at reviving economic growth after last year’s weak performance, including the possibility of another rate cut.

Another rate cut likely

BSP Governor Eli M. Remolona Jr., who chairs the Monetary Board, said another rate cut remains possible, depending on central bank data and inflation trends.

RCBC chief economist Michael Ricafort said a February rate cut is increasingly likely amid political uncertainty and slowing economic growth, after the PSA reported full-year 2025 gross domestic product (GDP) growth at 4.4 percent.

“I think that’s become a foregone conclusion at this point,” he said during a 4 February episode of the DAILY TRIBUNE program Straight Talk.

“The slower economic growth has made it more certain that rates will be cut. That’s what the government needs now. That’s what the country needs now — lower rates and support measures,” Ricafort added.

He also said that “still benign inflation and relatively weaker local GDP growth data somewhat increased the odds of a 0.25-percentage-point BSP rate cut at the next policy meeting” in a message to DAILY TRIBUNE following the release of the inflation data.

Giving the BSP sufficient headroom

Juan Paolo Colet, managing director at China Bank Capital Corporation, likewise said the weak economic outlook and low January inflation provide the BSP sufficient headroom for a February rate cut.

“With inflation still within the target range, the BSP has sufficient room to continue monetary easing to support economic growth,” he said.

“Given the low GDP print in the last quarter of 2025 and the potential risk of lingering weakness in the first quarter of 2026, there is a good chance the BSP will cut its policy rate on February 19,” Colet added.