Economists polled by the Bangko Sentral ng Pilipinas (BSP) reduced their mean inflation forecast for 2025 to 1.7 percent from a previous forecast of 1.9 percent, citing lower rice prices.
They have also adjusted downward their inflation forecasts for 2026 to a mean average of 2.8 percent, based on the August 2025 BSP Survey of External Forecasters (BSEF), compared with a previous 3 percent forecast in the July 2025 survey.
For 2027, the inflation forecasts remained at an average 3 percent.
Analysts’ projections for the consumer price index (CPI) were all within the BSP forecast range of 2-4 percent, as price pressures are expected to remain subdued.
According to the survey released by the BSP over the weekend, upside risks to inflation are mainly potential oil price hikes amid geopolitical tensions in the Middle East, as well as rice market policies, such as the suspension of rice imports. Higher minimum wages also pose an upside risk to CPI, the survey said.
What could pull down the inflation outlook are lower rice prices, it said.
“Amid these developments, the probability of inflation remaining within target declined, with a higher probability assigned to inflation falling below the low end of the target range in the near term,” the BSP said.
Analysts said there is a 29.8 percent chance — lower than 43.4 percent seen in July — that CPI will settle within the government target range this year.
The possibility that inflation will fall below the 2-4 percent target band is seen higher in the latest survey at 69.2 percent, compared with 56.6 percent in the previous survey.
For 2026, the probability of inflation staying within the target range is at 80.8 percent from 90.7 percent previously, the BSP said.
The latest BSEF was based on the forecasts of 23 analysts. The survey results are as of August 22, 2025.
Inflation to gradually climb near 4%
In the latest BSP Monetary Policy Report (MPR), it noted that the inflation outlook remains moderate over the near term.
“Inflation is projected to remain below the target range until Q4 2025. Compared with the previous round, the inflation projection for 2025 is slightly higher. This reflects the spillover effects of typhoons in July and the potential adverse impact of the approved rice import ban,” the BSP said.
The report, released over the weekend, said electricity rates and base effects from higher food prices will increase price pressures next year, with CPI likely approaching the upper end of the target in the last quarter of 2026, before easing in 2027.
Still, the decline in oil prices could bring 2026 inflation lower than forecast.
“This is tempered by higher minimum wage assumptions and the lagged impact of the BSP’s policy rate reduction in June 2025. By 2027, the effects of the higher minimum wage and the lagged impact of policy rate reductions are expected to continue influencing the inflation outlook,” the BSP said.
BSP rate cuts
The BSP said most analysts expect the Monetary Board will reduce its policy rates by 25 basis points (bps) to 50 bps during the rest of 2025.
For 2026, market watchers expect another 25 to 50 bps rate cut, but most agree that the BSP is likely to hold its monetary policy settings in 2027. (See related story on the BSP rate cuts also on this page)
