MANILA, Philippines — Inflation expectations remain well-anchored, with private sector analysts projecting that headline inflation will stay within the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target range for 2025 and 2026.
Based on the results of the BSP’s December 2024 Survey of External Forecasters (BSEF) conducted from Dec. 6 to Dec. 12, 2024, analysts said inflation likely hovered at 3.3 percent in 2024, down from the 3.4 percent forecast a month earlier.
Mean inflation forecasts for 2025 and 2026 were unchanged at 3.1 percent and 3.2 percent, respectively, compared to the forecasts a month ago.
“Inflation expectations continue to be well-anchored,” the central bank said in its December 2024 Monetary Policy Report.
“The BSEF showed that analysts expect within-target inflation for 2025 and 2026. Risks are broadly balanced, with headline inflation expected to stay low and manageable over the medium term.”
Respondents noted that the primary downside risks to inflation include sustained reductions in rice prices and a generally favorable outlook for global oil prices. A continued downtrend in core inflation also supports expectations of subdued price pressures.
However, analysts cautioned about upside risks, including supply disruptions due to geopolitical tensions, adverse weather conditions and potential spikes in electricity rates. Higher-than-expected wage adjustments and protectionist US trade policies were also flagged as risks that could push inflation upward.
Survey results showed that 18 out of 24 respondents assigned an 82.6-percent probability (up from 79.7 percent in November 2024) that inflation will remain within the BSP’s target range for 2025. Similarly, the probability for 2026 increased to 83.5 percent from 81.1 percent.
Given the manageable inflation outlook, the BSP sees room for measured monetary policy easing to support economic growth and employment.
“A further cut in the policy rate will help reinforce the impact of the prior monetary easing on market interest rates, lending activity and aggregate demand,” the BSP said.
Analysts widely expect the Monetary Board to cut the policy rate by at least 25 basis points by the end of 2024, with further reductions of 50 to 100 basis points anticipated in 2025. On the other hand, analysts expressed mixed views on borrowing costs for 2026.
The BSP delivered a total of 75 basis points of rate cuts last year as it shifts toward a less restrictive monetary policy stance. This brought the key rate down to 5.75 percent from 6.5 percent at the start of 2024.
“Looking ahead, the Monetary Board will maintain a measured approach in its easing cycle to ensure price stability conducive to sustainable economic growth and employment,” the central bank said.
The BSP will have its first policy review this year on Feb. 13.