INFLATION could climb to the upper end of the Bangko Sentral ng Pilipinas’ (BSP) target by mid-2026, driven by base effects and potential increases in global commodity prices, according to Metrobank.
During the bank’s 2025 Market Movers briefing, Metrobank Chief Economist and Market Strategist Nicholas T. Mapa said consumer price index gains are expected to accelerate in 2026 and approach the 4-percent target ceiling of the BSP by mid-year.
‘This upward pressure will be driven mainly by base effects on top of potential increases in global commodity prices, possibly fanned by US-imposed tariffs,’ Mapa said.
Still, Mapa said the average full-year inflation is still likely to stay within the BSP’s target range.
Despite the expected pickup in inflation, Mapa said the BSP is still poised to begin easing as early as December this year, with the Monetary Board maintaining a dovish stance through 2026.
The Monetary Board has delivered a total of 175-basis-points rate cut from a high of 6.50 percent after its fifth policy meeting this year, last October 9, bringing the benchmark interest rate to 4.75 percent.
‘With the price stability mandate still within reach, BSP will likely stay focused on supporting sagging growth momentum,’ Mapa said.
The anticipated rate cuts will feed directly into the bond market, with the Philippine yield curve expected to steepen next year.
Mapa said the lower borrowing costs should keep the short end anchored, while long-term yields may drift higher as the government increases borrowing in the 10-year tenor and as inflation gradually rises.
Expectations of further monetary easing would also reinforce downward pressure on short-term yields.
In terms of the peso, a weak local currency may continue next year as the US Federal Reserve continues its own easing cycle.
Mapa said the peso is still likely to face sustained pressure as structural factors, including projected current account deficits in 2026 and 2027, could weigh on the currency even as global conditions turn more supportive.
While the temporary ‘fiscal freeze’ could slow the economy in the short term, Mapa said growth should rebound next year as capital formation and investments recover, aided by the resumption of public construction and the lagged boost from monetary easing.