MANILA, Philippines — Filipino consumers and businesses are being told to buckle up for a prolonged period of high costs as the Bangko Sentral ng Pilipinas (BSP) released its latest medium-term forecasts, showing that inflation is unlikely to return to the government’s target range for the next three years.
In a briefing on Thursday, BSP officials revealed that the consumer price index (CPI) is projected to exceed the upper end of the 2-percent to 4-percent target band throughout 2025, 2026, and well into 2027.
The central bank’s updated baseline forecasts paint a challenging picture for the Philippine economy:
- 2025: Inflation is expected to average 5.2 percent.
- 2026: Projections sit at 4.8 percent.
- 2027: Inflation is forecasted to remain elevated at 4.3 percent.
This “target breach” marks a significant shift from earlier optimism that price hikes would normalize by early 2026. The BSP cited a “perfect storm” of global and local factors as the primary drivers of this persistent trend.
The BSP identified several “upside risks” that are keeping prices from cooling down:
- The Energy Emergency: With the country currently under a national energy emergency, high power rates and volatile global oil prices (exacerbated by Middle East tensions) continue to seep into the cost of logistics and manufacturing.
- Agricultural Supply Constraints: Persistent challenges in local food production, compounded by severe weather patterns and the high cost of fertilizers, are keeping rice, meat, and vegetable prices elevated.
- Transport Fare Hikes: Pending petitions for fare adjustments in public transport are expected to add more pressure to the headline inflation rate.
- The “Sticky” Core Inflation: Beyond food and fuel, the prices of services—such as rent, dining out, and healthcare—have become “sticky,” meaning they are slow to come down even when other costs stabilize.
The projection of a multi-year breach suggests that the BSP’s Monetary Board will likely maintain a “hawkish” stance, meaning interest rates are expected to stay “higher for longer.”
Economists believe that any hopes for significant rate cuts in 2026 have been dashed by these latest figures. High interest rates are used by the central bank to dampen spending and encourage saving, but they also make borrowing for homes, cars, and business expansions more expensive.
BSP Governor Eli Remolona Jr. emphasized that while the bank is prepared to take “necessary action” to prevent inflation from spiraling, the global environment remains highly uncertain. For the average Filipino family, this means that the “purchasing power of the peso” will continue to be under significant strain for the foreseeable future.
“The path back to our target is longer and more winding than we initially hoped,” a senior BSP official noted. “Our priority remains ensuring that inflation expectations do not become unanchored.”