PRIVATE SECTOR ANALYSTS investigated by the Bangko Sentral ng Pilipinas (BSP) still expects to headline inflation to stay within line the target margin of 2-4% until 2026.
In its Monetary Policy Report from its October meeting, the central bank said that economists’ inflation expectations “remost important well anchored.”
The BSP’s survey of external forecasters for October showed that the average inFForecasts for 2024 and 2026 were unchanged at 3.4% and 3.2% respectively, compared to September forecasts.
In the meantime, the average is inFThe forecast for 2025 was reduced to 3% from 3.1% previously.
“Analysts believe inflation risks are largely balanced, headline-grabbingFInterest rates are expected to remain low and within target throughout the policy horizon,” the BSP said.
The BSP’s basic forecasts are includedFThis year inflation will be 3.1%, 3.2% in 2025 and 3.4% in 2026.
Headline inflation rose to 2.3% in October, bringing the ten-month average to 3.3%.
The central bank said the balance of risks to the inflation outlook for 2025 and 2026 has shifted upwards, but is likely to remain within target.
“InFThe expectation is that the levy will settle at the lower end of the target band due to the impact of reduced ratesFfs on rice imports,” the report said.
An executive order that lowered the TariFfs on rice imports from 35% to 15% until 2028 cost eFfect in July.
“However, in the second half of 2025, inflation could rise towards the top of the target range, largely due to a positive fundamental evolution.Ffects,” it added.
It also noted that the upside risks are mainly due to “potential adjustments in electricity rates and higher minimum wages in regions outside Metro Manila.”
“Meanwhile, downside risks remain associated with the impact of lower import tariffs on rice,” the central bank said.
“Nevertheless, after taking into account the impact of these risks in the assigned probabilities, risk-adjusted inflation forecasts remain within the target range of 2-4% over the policy horizon.”
The BSP has said itFThe outlook for the economy and inflation expectations make it possible to adopt a “less restrictive monetary policy”.
“Nevertheless, the monetary authority will continue to closely monitor emerging upside risksFincluding geopolitical factors.”
The Monetary Board will hold its final policy review for the year on December 19. BSP Governor Eli M. Remolona Jr. has said it is possible to implement a 25 basis points (bp) interest rate cut during the meeting.
The central bank has cut rates by a total of 50 basis points since August, or when the BSP began its rate-cutting cycle.
GROW
Meanwhile, the BSP expects gross domestic product (GDP) growth to remain resilient.
“The Monetary Board also expects domestic economic growth to remain strong,” the report said.
“This reflects the improved outlook for household income and consumption, investment and government spending, supported by the start of the monetary easing cycle in August and the announced reduction in reserve requirements in October.”
Over the nine-month period, GDP averaged 5.8%. To meet the lower end of the government’s target of 6-7%, the economy must grow by at least 6.5% in the fourth quarter.
“This outlook is supported by the policy rate cut in August and the reserve requirement cut in October,” the BSP said.
“The forecast is consistent with the small negative output gap in 2024 and 2025, which is expected to become positive in 2026. The steady increase in the output gap reflects improved prospects for household consumption, investment and government spending.” — Luisa Maria Jacinta C. Jocson