Inflation Preview: Starting the year below 3%  

Oil-price hikes and the protracted impact of food supply shocks welcomed 2025. Still, consumer-price increase for January was little changed.

Metrobank Research forecasts headline inflation in January at 2.8% year-on-year (YoY) compared with 2.9% in December. Within-target consumer-price rise allows the central bank to further support the economy.

Food inflation hangover from 2024

At the beginning of 2025, costs of food  – except rice prices – rose due to the lingering effects of the El Niño weather phenomenon, succeeding typhoons, and the African Swine Fever.

Crops, fisheries, and livestock produce declined in the fourth quarter of last year, compared to the same period in the preceding year. This contributed to the tight supply, boosting prices of food commodities in January.

Oil prices fall too little, too late

Pump prices were elevated after three consecutive oil-price hikes in January. The increases were driven by more sanctions by the US and the UK on Russian oil as well as increased demand driven by Chinese stimulus packages in the east and cold weather in the west.

Although gasoline prices remained lower YoY and the month ended with a price rollback, the net increase in price due to the hikes still raised diesel prices YoY, which may signal a pickup in oil inflation.

Grounded electricity rates to partially offset higher oil

Metro Manila electricity rates declined month-on-month (MoM) after Meralco announced a reduction in rates. The cut was largely due to lower charges from both the Wholesale Electricity Spot Market and Independent Power Producers.

Likewise, other large electric distribution companies in the country also reduced rates in January.

Metrobank’s Take  

Despite supply-side pressure on commodities, current price levels suggest that inflation remains within the 2 – 4% full-year target of the Bangko Sentral ng Pilipinas (BSP). Monetary authorities forecast annual headline inflation of 2.5 – 3.3% in January.

Target-consistent inflation, together with the subdued economic performance last quarter, provides the BSP more urgency to lower the policy rate further at the next Monetary Board meeting in February.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

MARIAN MONETTE FLORENDO is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. Her academic background is in Mathematics and Economics. She loves solving puzzles and watching mystery movies. 

YOSHITAKA HIRAKAWA is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. He holds a Bachelor’s in Management Engineering from Ateneo de Manila University. With a background in data-driven decision making and quantitative methods, he aims to provide meaningful insights. Hungry for adventure, he constantly seeks new sights, sounds and experiences, from cliff jumping to trying new cuisines.