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Jan CPI Weaker Than Forecast, But M/M Details Still Resilient

PHILIPPINES

Jan inflation data was weaker than expected. The headline rose at 2.8% y/y, versus 3.1% expected and 3.9% prior. In m/m terms we were +0.6%, versus 0.8% forecast and 0.2% prior. Core inflation was 3.8% y/y, down from 4.4% in Dec and the slowest y/y pace since mid 2022.

  • In terms of the detail, for the m/m outcome we had reasonable inflation momentum across the board. Food was 0.8% a slight uptick on last month, while housing and utilities were +0.8%, and restaurants rose 0.7%. Only one sub-category saw a lower m/m pace compared to Dec last year.
  • In was the opposite story in y/y terms, with only one sub category seeing stronger y/y momentum versus Dec. Also noteworthy was the continued rise in rice inflation pressures to 22.6% y/y, the strongest pace since 2009.
  • Jan 2023 marked the y/y peak in terms of headline pressures for the CPI, so base effects will have no doubt played a role. This, and still positive m/m momentum may be what the BSP highlights in terms of preventing a near term policy pivot.
  • Still, parts of the government may argue for easier policy settings with headline CPI now sub the mid point of the BSP's 2-4% target band and core inflation back below the upper end of this band.

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