BSP: December inflation likely below target anew

December 30, 2025 | 12:00am

MANILA, Philippines — Headline inflation in December is expected to remain subdued and within the Bangko Sentral ng Pilipinas (BSP)’s below-target range, supported by easing price pressures and favorable base effects, although risks from food and fuel prices remain.

In its month-ahead inflation forecast, the BSP said the December inflation may settle within 1.2 to two percent, still below its two to four percent target.

“Upward price pressures may come from increased prices of major food items due to the lingering effects of adverse weather and strong holiday demand, as well as higher LPG (liquefied petroleum gas) and gasoline prices,” the BSP said.

However, these pressures “could be partly offset by lower electricity prices in Meralco-serviced areas and declining kerosene and diesel prices.”

The central bank said it would remain vigilant, noting that it “will continue to monitor domestic and international developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy.”

If inflation comes in below two percent in December, it will mark the 10th straight month that the consumer price index is below the BSP’s target range, underscoring the sustained easing of price pressures after last year’s supply-driven shocks.

Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said inflation could settle at the low end of the BSP’s forecast range.

“My inflation estimate for December is at 1.2 percent year-on-year,” Ricafort said.

He cited “still higher base effects, slightly stronger peso against the dollar, lower global commodity prices and global crude oil prices near five-year lows” as key factors helping keep inflation in check.

The BSP expects inflation to average 1.6 percent for full-year 2025 before gradually returning closer to the midpoint of the target range.

The central bank projects inflation at 3.2 percent in 2026 and three percent in 2027 as economic activity normalizes and transitory disinflationary factors fade.

Amid the below-target inflation environment, the Monetary Board cut the country’s key interest rate by 25 basis points to 4.50 percent during its Dec. 11 policy meeting.

This marked the latest move in the BSP’s easing cycle, which began in August last year.

In total, the central bank has reduced borrowing costs by 200 basis points so far, reflecting its assessment that inflation risks have become more manageable while downside risks to growth persist.

The BSP has reiterated that future policy decisions will remain guided by incoming data and evolving risks to the inflation outlook.

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