Economists surveyed by the Bangko Sentral ng Pilipinas (BSP) have kept their inflation expectations steady at 3.4 percent for this year, with an unchanged outlook that risks to price pressures are “broadly balanced” over the next three years.
Based on the highlights of the Monetary Board policy meeting on Oct. 16, the BSP noted the most recent Survey of External Forecasters for October, which showed that the mean inflation forecasts for 2024 and 2026 “remained steady at 3.4 percent and 3.2 percent, respectively” compared to the September survey.
However, the mean inflation forecast for 2025 was adjusted lower to 3 percent from 3.1 percent in the previous tally.
According to the BSP, “analysts consider the inflation risks to be broadly balanced, with headline inflation expected to remain low and within-target over the policy horizon.”
The BSP continues to expect that baseline inflation forecasts are on target for 2025 and 2026, or within the target range of 2 percent to 4 percent.
“Inflation is expected to settle near the low end of the target band due to the impact of reduced tariffs on rice imports. However, by the second half of 2025, inflation could rise toward the upper end of the target range, largely due to positive base effects,” the BSP said in the policy meeting highlights.
The BSP further noted that the balance of risks to the inflation outlook has shifted toward the upside for 2025 and 2026, mainly due to potential adjustments in electricity rates and higher minimum wages in regions outside Metro Manila.
Downside risks come from the expected impact of lower import tariffs on rice. “Nevertheless, after incorporating the impact of these risks at their assigned probabilities, the risk-adjusted inflation forecasts remain within (the target range) over the policy horizon,” the BSP said.
On Oct. 16, the BSP reduced the policy rate by another 25 basis points (bps), following its Aug. 15 rate cut of 25 bps. The target reverse repurchase (RRP) rate is currently at 6 percent.
After the government released the October inflation rate of 2.3 percent earlier this month, which was higher than September’s actual inflation of 1.9 percent, the BSP said it remains confident that the consumer price index (CPI) is on a decelerating path and should be closer to 2 percent in the coming months.
The BSP had estimated that inflation for October would settle between 2 percent and 2.8 percent, higher than September’s actual 1.9 percent CPI. As of the end of October, inflation averaged 3.3 percent.
Price pressures in October were mainly due to higher prices for food items such as vegetables, fruits, and fish. The increase in domestic oil prices and peso depreciation also added to upward price pressures. However, these upward price pressures were offset by reduced rice and meat prices, as well as lower electricity rates.
The BSP’s latest risk-adjusted inflation forecast for 2024 is 3.1 percent. The forecast for 2025 is 3.3 percent and 3.7 percent for 2026. The CPI projections will likely be revised again during the next Monetary Board policy meeting – the last one for 2024 – on Dec. 19.
The BSP’s survey of external forecasters normally includes about 20 to 30 economists. In the last three Monetary Policy Reports, the survey included analysts’ expectations for the direction of the BSP policy rate.
In the August survey, most analysts expected the BSP’s Monetary Board to reduce the policy rate by 25 bps in the third quarter, as occurred on Aug. 15, with a follow-up easing in the last quarter of 2024, in October and December.
Economists also expect the BSP to lower the rate by 50 bps to as much as 250 bps in 2025, with additional cuts of up to 100 bps by the end of 2026.