Inflation likely cooled to 4% in Dec.

HEADLINE INFLATION may have further eased in December and settled to within the 2-4% target for the first time in almost two years amid lower prices of fruits and vegetables, electricity and fuel, analysts said.

Inflation likely eased to 4% last month, according to a median estimate of a BusinessWorld poll last week. This is within the 3.6% to 4.4% forecast given by the Bangko Sentral ng Pilipinas (BSP) last week.

December could mark the first time inflation returned to the BSP’s 2-4% target after 20 straight months of going above target. It would also be the slowest since 3% in February 2022.

At 4%, the December inflation would be a tad slower than 4.1% in November and significantly lower than 8.1% in December 2022.

This would also bring the fullyear inflation to 6%, matching the BSP’s average baseline forecast for 2023.

The Philippine Statistics Authority is scheduled to release consumer price index data for December on Jan. 5.

In a statement on Friday, the BSP said lower prices of vegetables, fruits, fish, electricity and fuel might have contributed to the downward price pressure.

On the other hand, higher prices of rice and meat would likely be the primary sources of upward pressures, the central bank said.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision making,” it added.

Philippine National Bank economist Alvin Joseph A. Arogo said in an e-mail that inflation might have slowed to 4% in December due to base effects and lower electricity rates.

Manila Electric Co. cut the rate for a typical household by P0.6606 to P6.5332 per kilowatthour last month.

China Banking Corp. Chief Economist Domini S. Velasquez noted that most of the upward price pressures last month came from food items.

“However, their impact was partially offset by declines in the prices of vegetables, eggs, sugar and electricity. Additionally, despite recent oil price hikes, domestic pump prices, on average, were lower month on month,” she said in an e-mail.