December inflation sped up to 2.9%, fastest in 4 months

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Inflation continued its uptrend in December 2024 to post its fastest increase in four months, but the price growth remained benign, which, in turn, helped the Bangko Sentral ng Pilipinas (BSP) achieve its annual inflation target for the first time in three years.

The consumer price index (CPI) rose to 2.9 percent year-on-year in December, quicker than the 2.5 percent clip recorded in the preceding month, the Philippine Statistics Authority (PSA) reported on Tuesday.

The latest reading was the biggest gain since August 2024 and was higher than the 2.7 percent estimate of economists polled by the Inquirer last week. The December print nevertheless settled within the 2.3 to 3.1 percent forecast range of the BSP for the month.

But the uptick last month was moderate, bringing the average inflation for 2024 to 3.2 percent. This marked the first time since 2020 that the full-year price growth had settled within the 2 to 4 percent target range of the central bank. In 2023, inflation had averaged 6 percent.

READ: Inflation speeds up to 2.9% in December 2024 — PSA

At a press conference, National Statistician Claire Dennis Mapa said costlier housing and utilities were the top contributors to the faster inflation rate last month.

Figures showed prices of housing, water, electricity, gas, and other fuels had risen by 2.9 percent in December from 1.9 percent before. Such an increase was responsible for 52.9 percent of the spike in the headline inflation rate last month.

The second top source of upward price pressures was transport costs, which inched up to 0.9 percent from -1.2 percent previously. Notably, fares for passenger ships jumped at a rate of 71.9 percent, as many Filipinos returned to their provinces to celebrate Christmas with their families.

The next biggest driver of inflation in December was food, following the typical surge in demand for “noche buena” items. Data showed food price gains stood at 3.4 percent, with vegetable inflation jumping by 14.2 percent as the agriculture sector still reeled from the devastation of powerful storms that hit the country late last year.

Moving forward, Mapa said expectations for January inflation are still “mixed.” The PSA chief said rice price gains might turn negative this month after further easing to 0.8 percent in December, the softest reading since January 2022. But vegetable prices might remain stubbornly high.

“We’ll see the dynamics of prices,” Mapa said.

More easing?

In a statement, Secretary Arsenio Balisacan of the National Economic and Development Authority (Neda) said the Marcos administration is optimistic about curbing inflation.

“We will build upon this momentum as we commit to keep the inflation rate within our target range in 2025,” Balisacan said.

That inflation is expected to stay benign despite persistent upward price pressures means the central bank has space to continue its rate-cutting cycle to boost economic growth, which significantly slowed in the third quarter of 2024.

The BSP last year delivered a total of 75-basis point (bp) cut to the key rate that banks typically use as a guide when pricing loans. And Governor Eli Remolona Jr. had hinted at additional easing moves for this year as financial conditions are still “somewhat tight,” even floating the possibility of another rate cut at the Feb. 20 meeting of the Monetary Board.

“On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” the central bank said.

”Nonetheless, the monetary authority will continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors,” it added.