By Benjamin Cuaresma
MANILA — The Bangko Sentral ng Pilipinas (BSP) sees inflation gradually cooling in the medium term, but warned that the battle against rising prices is far from over as higher global oil costs and mounting inflation expectations threaten to keep pressure on the Philippine economy.
BSP Governor Eli Remolona Jr. issued the warning Monday during the Development Budget Coordination Committee (DBCC) briefing before the House of Representatives, where lawmakers began deliberations on the proposed P7.2-trillion national budget for 2027.
“Over the medium term, we expect inflation to ease gradually. However, risks remain tilted to the upside,” Remolona said.
The central bank’s assessment comes as inflation remains stubbornly elevated despite posting a third consecutive monthly slowdown.
Headline inflation eased to 6.2% in July from 6.4% in June, continuing its gradual decline but remaining substantially above the BSP’s 3% target and outside the government’s 2%-to-4% preferred range.
Remolona said the elevated inflation environment has been driven largely by global supply shocks and their impact on prices within the domestic economy.
“However, inflation remains above our target of 3%. As you know, this is due largely to global supply shocks and the spillover effects on prices in the domestic economy,” he said.
For Filipino consumers, the numbers underscore a difficult reality: even with inflation slowing, the pressure on prices has not disappeared.
The BSP Monetary Board is scheduled to meet on August 27, with officials set to assess the latest economic evidence before determining the central bank’s next policy action.
Remolona said the BSP remains ready to respond if necessary to bring inflation back toward its target.
“The Monetary Board will meet next week to decide on the next policy action. We will look at all the evidence and we are prepared to take further steps as necessary to ensure that inflation returns to target,” he said.
BSP Deputy Governor Zeno Abenoja said the central bank expects inflation to average 6.4% in 2026 and 4.5% in 2027—both still above the BSP’s 3% target.
The outlook becomes more favorable in 2028, when the BSP sees headline inflation potentially easing to around 3.1%, bringing it much closer to the central bank’s target.
“The BSP sees headline inflation averaging at 6.4% in 2026, 4.5% in 2027, and both numbers are above the inflation target of 3%. However, by 2028, it’s possible that inflation will be close to the target at around 3.1%,” Abenoja said.
But the road to that projected improvement remains vulnerable.
Abenoja identified higher global oil prices and higher inflation expectations as major sources of upside risk.
“The BSP sees upside inflation risk and this could emanate largely from the higher global oil prices and higher inflation expectations,” he said.
The Warning Behind the Forecast
The BSP’s message is clear: inflation may be slowing, but it has not yet been defeated.
With prices still well above target and global oil markets posing a potential fresh shock, the central bank faces a delicate policy decision—balancing the need to bring inflation under control while watching the broader economy for signs that further action may be necessary.
For now, the BSP is betting that inflation will eventually move closer to target.
But with the next policy decision only days away, the central bank is making it equally clear that the fight against rising prices is not over yet.
