Despite inflation climbing to a six-month high in September, Singapore-based Oversea-Chinese Banking Corp. Ltd. (OCBC) still expects consumer prices in the Philippines to rise by less than two percent on average for the entire year.

Average headline inflation stood at 1.7 percent as of end-September, remaining below the government’s target range of two to four percent. OCBC’s forecast of an average 1.6 percent for 2025 is slightly lower than the Bangko Sentral ng Pilipinas’ (BSP) retained projection of 1.7 percent for this year.

To recall, higher prices in food and non-alcoholic beverages, transport, and restaurant and accommodation services were the main drivers of inflation last month.

“These increases more than offset lower inflation in the alcoholic beverages, health, and personal care categories,” OCBC noted.

“Looking ahead, we maintain our 2025 headline CPI [consumer price index] forecast at 1.6 percent, implying that inflationary pressures will remain well-contained,” OCBC said in an Oct. 13 commentary seen by Manila Bulletin.

Meanwhile, OCBC expects the BSP to continue cutting key borrowing costs by another quarter of a point at its final policy meeting this year in December.

“More importantly, the BSP was more dovish, opening the door to further rate cuts. Consequently, we are revising our call for the BSP to add another 25-basis-point (bp) rate cut for 2025, taking the policy rate to 4.5 percent,” OCBC said.

Last week, the BSP unexpectedly lowered its key policy rate by 25 bps to 4.75 percent, instead of keeping it steady as most economists had forecast. The overnight deposit and lending rates were likewise trimmed to 4.25 percent and 5.25 percent, respectively.

BSP Governor Eli M. Remolona Jr. said the country’s economic outlook has softened, citing that corruption issues in public infrastructure spending have dampened business confidence.

Meanwhile, OCBC noted that the central bank’s inflation outlook remains “benign and well within the target range.”

Additionally, the BSP reduced its price growth projections, now expecting 3.1 percent in 2026 and 2.8 percent in 2027, down from 3.3 percent and 3.4 percent, respectively.