With inflation starting the year firmly within the Bangko Sentral ng Pilipinas’ (BSP) target range, Metropolitan Bank & Trust Co. (Metrobank) expects monetary easing to continue this year, supporting economic activity despite emerging price pressures.
Philippine headline inflation accelerated to 2% year-on-year in January, up from 1.8% in December, but still comfortably within the BSP’s 3±1% target band. Core inflation, which strips out volatile food and energy items also picked up to 2.8%, signaling early signs of demand normalization as the economy recovers.
Metrobank noted that the main upward pressure came from housing, water, electricity, gas, and other fuels, driven by annual rental adjustments outside the National Capital Region and higher electricity rates. Meanwhile, food inflation eased to 1.1%, helped by lower prices across most major food items and continued rice deflation, which helped temper overall price growth.
“While inflation is moving higher from recent lows, it remains well-anchored within the central bank’s target,” Metrobank said. “This gives policymakers room to continue supporting growth, even as demand-side pressures gradually build.”
For the full year, Metrobank maintains its 2026 inflation forecast of 3.3%, citing low base effects and recovering demand that may push prices higher in the second half of the year. However, these are expected to be partially offset by softer consumer spending and supply-side factors such as the lifting of the rice import ban.
Given the inflation backdrop, Metrobank expects the BSP to proceed with further monetary easing. The bank forecasts a cumulative 50 basis points of policy rate cuts in 2026, bringing the reverse repurchase (RRP) rate to 4% by year-end, as authorities balance growth support with price stability.
Metrobank added that barring major supply-side shocks, the current inflation environment supports a measured and data-driven policy path, one that allows the economy to gain momentum without reigniting excessive price pressures.
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