Stability or strain? Government holds 2 to 4% inflation target steady for next two years as January inflation rises

January data show prices staying within range, but pressure is building in housing, utilities, and everyday essentials.

The government is standing by its 2 to 4% inflation target for 2026 and 2027, betting that easing food prices can offset growing pressure from energy, housing, and other non-food costs. Economic managers say the policy framework remains intact, even as January data show price pressures quietly rebuilding in areas households and businesses struggle to avoid.

Data released by the Philippine Statistics Authority show inflation rising to 2% in January from 1.8% in December. The figure remains within target and well below the 2.9% recorded a year earlier. On the surface, that suggests stability. The composition of inflation, however, tells a more uneasy story.

The January uptick was driven primarily by housing, water, electricity, gas, and other fuels, which accounted for 33.5% of the total increase, or 0.7 percentage point of the headline figure. These are fixed monthly expenses that arrive regardless of income level or spending habits, leaving households with little room to adjust.

Restaurants and accommodation are pressure points

Restaurants and accommodation services followed as another major source of pressure, with prices rising 4.0% in January from 2.4% in December. Higher operating costs, particularly electricity, rent, and logistics, are increasingly being passed on to consumers. Small businesses face tighter margins, while workers and families see monthly budgets stretch thinner as everyday expenses rise.

Food inflation offered some relief, slowing to 0.7% from 1.2% in December, driven largely by a sharp deceleration in vegetable prices. Still, fish and other seafood, vegetables, and meat remained the biggest contributors to food inflation, underscoring why grocery bills continue to feel heavy even as price growth eases.

The slowdown in food prices has not translated into meaningful relief for everyone. Inflation for the bottom 30% income households—the poorest three out of every ten Filipino families— climbed to 1.6% in January from 1.1% the previous month. These households spend a much larger share of income on essentials and have limited buffers. Any savings at the wet market are often wiped out by higher electricity bills and housing costs.

Inflation cools in NCR but heats up outside Metro Manila

Regional data also show inflation moving at different speeds. In the National Capital Region, inflation slowed to 1.9% from 2.3%, helped by softer housing and food inflation. Outside NCR, inflation picked up to 2.0% from 1.7%, driven largely by faster increases in housing and utility costs. The divergence points to stronger price pressure building in the provinces, where incomes tend to be lower and cost-saving options more limited.

Core inflation, which excludes volatile food and energy items, rose to 2.8% in January from 2.4% in December, indicating that underlying price pressure remains firm even as headline inflation stays within target.

The Department of Economy Planning and Development said it remains vigilant against risks that could push prices higher, even as it keeps the medium-term inflation target unchanged. Officials pointed to measures such as streamlining the Net Metering Program, expanding consumer incentives for renewable energy, and standardizing lifeline electricity subsidies to cushion households from rising power costs.

At the same time, non-food inflation is beginning to pick up. Electricity prices rose 6.5% in January from 4.1% in December, while housing rentals increased to 2.8% from 2.4%.

The target may be holding, but the burden is shifting. Inflation remains within range, yet it is being driven less by discretionary spending and more by essentials households and businesses cannot delay. Stability in the data has yet to translate into relief in the daily lives of Filipinos.

 

 

While food inflation has slowed, higher power bills and rent continue to weigh on budgets, particularly outside Metro Manila and among lower-income families.

 

 

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