Inflation seen staying within target

MANILA, Philippines —  Inflation expectations remain anchored within the two to four percent target over the medium-term, giving the Bangko Sentral ng Pilipinas (BSP) more room to gradually unwind its tight monetary stance as growth headwinds loom.

Private sector forecasts gathered by the BSP in March pegged inflation at an average of 3.1 percent for 2025, 3.3 percent for 2026 and 3.4 percent for 2027. All estimates are well within the government’s two to four percent target range.

“The survey respondents see upside risks from the effect of geopolitical tensions, changes in global trade policies, adverse weather conditions, and upward adjustments in utility rates, transport charges, and minimum wages. Downside risks are still seen from lower rice prices,” the BSP said.

The central bank noted that inflation has continued to decelerate, with headline inflation dropping to below the two percent target in March.

Domestic rice prices have fallen in tandem with global trends, aided by lower tariffs and direct government interventions to stabilize supply. Slower increases in fuel and service-related costs have also helped temper overall inflation.

Despite this favorable inflation backdrop, the Monetary Board struck a cautious tone, pointing to a weaker global economic environment that could weigh on the country’s growth prospects.

The BSP expects the country’s gross domestic product (GDP) growth to settle near the low end of the government’s six to eight percent targets through 2027, as external uncertainty and a still-restrictive real policy rate offset some of the benefits of disinflation.

“BSP staff estimates suggest slightly lower growth forecasts for 2025 relative to the previous forecast round in February. The downward revision could be attributed to the higher real policy rate, which outweighed the impact of the decline in oil prices,” the central bank said.

International risks also remain elevated. The global economy has shown signs of softening, with services activity slowing and major advanced economies losing momentum. While manufacturing in China, India and the Association of South East Asian Nations showed improvement in early 2025, the broader global outlook remains clouded by rising tariffs and geopolitical frictions.

In response, the BSP slashed its policy rate by 25 basis points to 5.50 percent in its April 10 meeting, citing a more manageable inflation path and the need to support economic activity. However, it emphasized that further easing will be “measured” and data-dependent.