BSP: Reduced Rice Tariffs and Negative Base Effects Expected to Aid Disinflation

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects lower rice tariffs and negative base effects to help keep inflation within its target range of 2 to 4 percent this year. Inflation in January remained steady at 2.9 percent, slightly higher than 2.8 percent from the previous year.

The BSP noted that these factors, along with a stable inflation outlook, should support disinflation. However, the risks to inflation remain on the upside, especially due to potential transport fare and electricity rate increases.

While domestic demand is expected to stay strong, the BSP warned that external factors could impact economic growth. Still, lower inflation and a better labor market should boost private spending.

The BSP will continue monitoring inflation risks and will discuss them at the upcoming monetary policy meeting on February 13. The central bank is likely to adopt a cautious approach to easing monetary policy to maintain price stability and sustainable growth.

Economist Aris Dacanay from HSBC stated that January's inflation was slightly above expectations but not concerning. He believes the BSP will likely cut its policy rate by 25 basis points to 5.5 percent next week. With inflation still within the target range, the BSP has room to focus more on growth.

Core inflation also slowed in January to 2.6 percent, supporting further rate cuts. Dacanay pointed out that the drop in inflation for restaurants and accommodation services suggests weak demand and tighter profit margins for businesses.

BSP Governor Eli Remolona Jr. has indicated that a 25-basis-point rate cut is a possibility at the February 13 meeting, following a series of rate cuts since August 2024.

Source: https://www.philstar.com/business/2025/02/06/2419460/bsp-lower-rice-tariffs-negative-base-effects-support-disinflation