MANILA – Headline inflation in the Philippines is projected to remain subdued at around 2.6 percent in December, staying comfortably within the government's target range of 2 to 4 percent. This positive outlook is primarily attributed to the continued decline in rice prices, according to a leading economist.

"Lower rice prices, which constitute a significant portion of the consumer price index (CPI) basket, are expected to play a crucial role in keeping inflation benign," said Michael Ricafort, chief economist at Rizal Commercial Banking Corp. "The reduction in tariffs on imported rice, implemented earlier this year, has contributed significantly to moderating retail rice prices."

Rice inflation, a major driver of inflation in recent months, has shown a significant downtrend, easing from a high of 22.5 percent in June to 5.1 percent in November. This decline is a direct result of the government's efforts to reduce rice prices through Executive Order 62, which lowered tariffs on imported rice.

Furthermore, global crude oil prices have remained relatively low, hovering near 2.5-month lows. This trend is supported by softer economic data from China, the world's second-largest economy and a major importer of oil and other commodities. "Lower global commodity prices will contribute to keeping inflation in check across many countries, potentially leading to future interest rate cuts by the Federal Reserve, which could be mirrored by the Bangko Sentral ng Pilipinas," Ricafort added.

While the overall outlook for inflation remains positive, some seasonal factors, such as increased demand and spending during the Christmas holiday season, may lead to a slight uptick in prices.

The Philippine Statistics Authority is scheduled to release the official inflation data for December in the first week of January.

"Looking ahead, inflation is expected to remain within the BSP's target range of 2 to 4 percent, potentially even staying at around 2 percent levels in the early part of 2025," Ricafort concluded.