WITH inflation starting the year firmly within the central bank’s target range, Metropolitan Bank & Trust Co. (Metrobank) said monetary easing could continue in 2026, providing support to economic activity despite emerging price pressures.
Philippine headline inflation rose to two year on year in January from 1.8 percent in December, remaining well within the Bangko Sentral ng Pilipinas (BSP) 3±1 percent target band and within the central bank’s forecast range of 1.4 percent to 2.2 percent. Core inflation, which excludes volatile food and energy items, also edged up to 2.8 percent, signaling early signs of demand normalization as the economy recovers.
Metrobank said upward pressure mainly came from housing, water, electricity, gas and other fuels, driven by annual rental adjustments outside the National Capital Region and higher electricity rates. Food inflation, however, eased to 1.1 percent, supported by lower prices across most major food items and continued rice deflation, helping 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.”
The BSP, for its part, said the inflation outlook remains benign and inflation expectations are well anchored. For 2026 and 2027, inflation is expected to settle within the three percent ± 1.0 percentage point target.
The central bank’s Monetary Board noted that the outlook for domestic economic activity has weakened further, with business sentiment continuing to decline amid governance concerns and uncertainty over global trade policy. Nevertheless, domestic demand is expected to rebound gradually as the effects of monetary policy easing filter through the economy and as public spending improves.
For the full year, Metrobank maintained its 2026 inflation forecast at 3.3 percent, citing low base effects and recovering demand that could push prices higher in the second half of the year. These pressures are expected to be partly offset by softer consumer spending and supply-side factors, including the lifting of the rice import ban.
Against this backdrop, Metrobank expects the BSP to proceed with further monetary easing, forecasting a cumulative 50 basis points of policy rate cuts in 2026 that would bring the reverse repurchase rate to four percent by year-end, as authorities balance growth support with price stability. / KOC