Softer inflation seen anew in December

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January 5, 2026 | 12:00am

MANILA, Philippines — Most economists expect inflation to have slowed in December from November’s 1.5 percent, extending the streak of subdued price pressures and reinforcing expectations of continued policy easing by the Bangko Sentral ng Pilipinas (BSP).

If a lower December inflation print is realized, it would mark the 10th consecutive month that headline inflation remains below the BSP’s two to four percent target range.

Reinielle Matt Erece, an economist from Oikonomia Advisory & Research Inc., said December inflation likely settled at 1.4 percent, citing stable food prices and lower electricity costs despite seasonal spending pressures.

“While holiday spending is a definite factor in the elevated inflation print, food prices have remained stable. The prices of some food items have even gone down, especially vegetables,” he said.

Power rates also edged lower during the month, helping rein in inflation and offset the expected holiday-related boost from higher bonuses and remittance inflows.

Given these trends, Erece expects full-year inflation to settle well below the central bank’s target.

“Hence, I expect full-year inflation to just settle at 1.6 percent, far below the two to four percent inflation target of the central bank.”

Erece said this environment supports a more accommodative monetary stance.

“With this, I expect the BSP to maintain a dovish sentiment with regard to their monetary policy. We may see maybe a 75-basis-point rate cut for the entirety of 2026,” he said.

He also expects additional reductions on banks’ reserve requirements this year. “Despite these measures, 2026 inflation is likely to still remain within targets, barring any shocks and externalities.”

UnionBank chief economist Ruben Carlo Asuncion sees even softer inflation in December, estimating headline inflation at 1.2 percent year-on-year.

“We estimate December 2025 headline inflation at 1.2 percent, reflecting subdued price pressures despite the holiday season,” Asuncion said.

He noted that demand conditions remained weak. “Consumer spending remained weak amid worsening net pessimism in the fourth quarter, as indicated by BSP’s sentiment survey.”

On the supply side, Asuncion said easing costs helped contain inflation. “Easing global oil prices and cooler weather helped temper energy costs, while rice deflation likely persisted, though its impact is diminishing,” he said.

Asuncion expects inflation to average 1.6 percent for full-year 2025 and rise to 2.6 percent in 2026. This would be driven by a gradual demand recovery, potential food supply constraints and commodity price volatility.

Given this outlook, he anticipates the BSP to maintain an accommodative stance, with two additional rate cuts likely in the first half of 2026 if inflation stays within target and global conditions remain supportive.

Jonathan Ravelas, senior adviser at professional services firm Reyes Tacandong & Co., also expects inflation to slow, placing December inflation at 1.1 percent year-on-year.

“In December, inflation slowed due to a balancing act: rising holiday and fuel prices were cushioned by lower utility costs and calming core inflation, bolstered by central bank rate support,” Ravelas said.

Meanwhile, BPI lead economist Jun Neri offered a more cautious view, with a higher December estimate of 1.7 percent. “Our point estimate for December is 1.7 percent, which implies a month-on-month rise driven mainly by vegetables and rice inflation,” Neri said.

Looking ahead, Neri expects inflation to firm up this year. “We expect 2026 inflation to average at 3.3 percent,” he said, adding that monetary easing is still likely.

“We think BSP will cut twice more in 2026 as growth remains below potential and inflation is likely to remain on target through the first half of the year.”

Overall, analysts said the expected December slowdown would underscore the persistence of below-target inflation, giving the central bank ample room to support growth as long as price pressures remain contained.

The Philippine Statistics Authority is set to release the December inflation report tomorrow, Jan. 6, 2026.