The Bangko Sentral ng Pilipinas (BSP) has revised its economic projections, lowering its inflation forecast for 2026 to 6.1% from 6.4%, while raising its 2027 estimate to 5.4% from 4.5%.
During a briefing on the central bank’s monetary policy stance, Assistant Governor Rogelio Mercado Jr. explained that lower-than-expected inflation rates in June and July, alongside falling global oil prices, contributed to the reduced 2026 outlook.
However, he noted that the decline would be partially offset by the effects of El Niño on fourth-quarter rice prices.
“The 6.1% inflation is, of course, driven by lower-than-expected inflation in June and July, as well as declining oil prices. This would be partly offset by the impact of El Niño on rice prices in the fourth quarter of 2026,” Mercado said.
Mercado added that the 2026 estimate already incorporates potential global risks, including geopolitical uncertainties in the Middle East.
“So the recent forecast that we have for the full year, which is at 6.1, also, of course, takes into account all risks involved, including potential risks that could surprise, in particular, related to the Middle East,” he stated. “So we’ve looked into a lot of risks and considered that this would already have been factored into the 6.1% inflation for 2026.”
Conversely, the upward revision for 2027 reflects anticipated pressures from a severe El Niño episode on domestic food supply, as well as upcoming minimum wage hikes.
“For 2027, our inflation forecast is now at 5.4%. This is up from 4.5%, and it will be driven by the impact of severe El Niño on rice prices, as well as the impact of higher minimum wage increases,” Mercado explained.
The central bank anticipates inflation to peak in the final quarter of 2026 before steadily slowing down to enter the target range by late 2027.
“We expect inflation to peak around the fourth quarter of this year, and then it will start to ease, and we expect it to go back to the tolerance range around the fourth quarter of 2027,” Mercado added.
By 2028, inflation is projected to settle at 3.3%, nearing the central bank’s 3% target.
“So for 2028, our latest central forecast is that inflation will return to around 3.3%, which is close to our target and within the tolerance band,” Mercado said.
Addressing the central bank’s comfort level with the long-term outlook, BSP Governor Eli Remolona emphasized their commitment to maintaining price stability within the target range.
“We worry a lot more when it’s above the tolerance range. But we’re happiest when it’s at the target,” Remolona noted, reinforcing that monetary policy remains proactive.
“Yeah, when we do monetary policy, we’re forward-looking. We don’t look at inflation that has already happened. We look at the inflation that’s coming. And that’s how we decide.”