Annual headline inflation in January was 3.9 percent, slowing from the previous month's rate of 4.2 percent, based on a new series using 2006 prices, and was slightly below the 4.0 percent forecast in a Reuters poll.

"This supports our view that inflation remains manageable over the policy horizon, and affirms we continue to have policy space, should the need to support growth persist," Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco said in a mobile text message to reporters after the data release.

The central bank had forecast January inflation to be between 3.6 percent and 4.5 percent.

Tetangco also said the central bank was watching developments overseas and locally, particularly on how events may impact inflation.

The Bangko Sentral ng Pilipinas cut its key policy rate by 25 basis points to 4.25 percent in January, the first cut in 2 1/2 years, and will review rates again in March.

An uncertain outlook for the global economy coupled with sluggish exports will strengthen the case for a another rate cut in March, especially with inflation slowing, analysts said.

"Aside from this better-than-expected print, there are a number of reasons for the BSP to cut rates in March," said Jun Neri, economist at Bank of the Philippine Islands.

"Clearly, they need to boost demand further, particularly investment spending to help compensate for persistent weakness in merchandise exports," he added.

BSP Deputy Governor Diwa Guinigundo said last month the January inflation data would be a key factor to determining if there was room to support growth further after growth in 2011 of 3.7 percent came in below a government target.

Last week, the central bank also cut banks' reserve requirements by 3 percentage points, a move they said would boost liquidity, but won't be inflationary. The reserve cut will take effect in April.

Manila has yet to announce its 2012 and 2013 inflation targets under the new base year, but central bank officials have said they would not be significantly different from the 3 to 5 percent target previously set for both years using 2000 prices.

The central bank expects average inflation of 3.1 percent in 2012 and 3.4 percent in 2013, both below economists' inflation forecasts of 3.7 and 4.2 percent for this year and next in a Reuters poll in January.

Authorities expect the economy to pick up pace this year on the back of higher and faster government spending. Manila is targeting growth of 5 to 6 percent in 2012.