December headline inflation 'quickened' to 2.9%

The Philippine Statistics Authority (PSA) [link] released its December Consumer Price Index data and revealed that headline prices were up 2.9% y/y from December 2023, and up 0.5% from the previous month. Relative to 2018 prices, this represents the lowest “purchasing power” of the Philippine peso (0.78) in the PSA’s 20-year records dating back to 1994. The PSA said that the main drivers of this result were housing, water, electricity, and gas prices, plus increases in prices related to recreation, sport, and culture. The Bangko Sentral ng Pilipinas (BSP) released a statement [link] saying that the December result (2.9%) “is within the BSP’s forecast range of 2.3 to 3.1 percent”, but that the “balance of risks to the inflation outlook continues to lean to the upside due largely to potential upward adjustments in transport fares and electricity rates.” The BSP projects that domestic demand will “remain firm but subdued”, and that private domestic spending will be “supported by easing inflation and improving labor market conditions.” The BSP said the result “continues to support the BSP’s shift toward a less restrictive monetary policy”, but that it will “continue to closely monitor the emerging upside risks to inflation, notably geopolitical factors.”

MB bottom-line: Nothing new here. The CPI is as high and hot as ever, and the BSP is taking a victory lap for having loosely stabilized prices at the peak. The BSP doesn't meet again to decide on interest rates until February, and before that, it will get a good three weeks to observe the results of whatever the US Federal Reserve does when it meets to adjust US interest rates at the end of January. American markets were lightly shaken when the Fed cautioned that its FY25 cuts might not meet the heightened expectations that grew after its late FY24 pivot, but both the Fed and BSP seem to assume that there are more cuts in store for this year. At least for now. Who knows what will happen in the first few days of Trump’s presidency after he is inaugurated on January 20th. Just remember: the BSP’s biggest upside risk to inflation is “geopolitical factors”. President-elect Trump just said that he can't rule out the use