Full-year average inflation for 2025 settled at 1.7%, below the BSP’s 2.0%-4.0% target and the country’s lowest annual average inflation rate since 2016.

The food and non-alcoholic beverages basket was the primary driver behind the acceleration in December, accounting for nearly 98% of the uptrend. This was due in large part to faster inflation in vegetables, tubers, etc., attributed to seasonal holiday ef

Core inflation, which excludes volatile food and energy items, maintained its pace from the previous month at 2.4%.

Metrobank forecasts that headline inflation will pick up to 3.3% in 2026, primarily due to low base effects from last year, while settling within the BSP’s 2-4% target. In addition, stronger demand-side pressures and higher import global commodity prices

Subdued inflation, coupled with soft demand in 2026, keeps the door open for the BSP to reduce policy rates further this year.

Metrobank forecasts that the BSP will continue with the easing cycle and deliver a cumulative 50 basis points worth of cuts this year. This will bring the target reverse repurchase (RRP) rate down to 4.00% by year-end.