Event
Headline inflation hit 2.4% YoY in Feb from 2.0% in Jan, in line with street’s expectations and within the lower bound of the BSP’s 2.3-3.1% forecast. Food inflation rose to 1.6% YoY (vs 0.7% in Jan) driven by continued normalization in rice prices (base effects and tighter domestic supply).
View
Non-food inflation continue to firm up (+2.8% YoY from 2.5% in Jan). Price pressures were most visible in services categories, while transport inflation remained subdued as fuel prices stabilized (for now).
Catalyst
We expect headline inflation to average higher as food price normalization and services inflation continue to firm. Assuming oil prices remain near US $80-90/bbl and the Php trades around P59-60/US$, inflation could remain within a 2.3-2.8% range over the next few months.
Action
Another rate cut remains justifiable but is more likely to occur later in the year as the BSP assess the persistence of food price normalization, energy costs, and Php volatility. Meanwhile, we are raising our 2026-27E inflation forecast to 3.2% (from 2.8%) and 3.0% (from 2.9%), respectively.
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