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Forecast Update: Recalibrating our calls
Here are our forecasts for inflation, economic growth, and what the US and Philippine policymakers will do.
By Metrobank Research
It’s time to refine our forecasts.
As US President Donald Trump begins to put in place his policy, policymakers in the US are on the lookout for its ripple effects. In the Philippines, monetary authorities are watching too, especially after a string of economic and price data paint some brewing risks.
We have released our forecast updates covering inflation, economic growth, and what the US and Philippine central banks will likely do.
Imported inflation spills over
We slightly nudge our 2025 average inflation forecast higher to account for potential imported inflation stemming from the projected peso depreciation over the period. The weaker local currency will translate to higher cost of food and energy imports, exerting upward pressure on overall local prices.
Barring any supply side shocks, we keep our estimate for 2026.
Fed to display caution
US Federal Reserve (Fed) Chair Jerome Powell earlier signaled a “cautious” Fed, as they wait and see how new policies play out.
We now forecast a total of 50-basis points (bps) worth of policy rate cuts in 2025, with a possible additional quarter-point reduction should US inflation and labor conditions remain favorable. The less-dovish stance expected from the Fed considers the anticipated inflationary impact from potential supply-chain concerns in the US amid broader and higher tariffs imposed on its major trading partners.
Meanwhile, we keep our forecast of a cumulative 75 bps worth of policy rate cuts for 2026.
Metrobank’s official forecasts
| | 2025 Previous | 2025 Updated | 2026 Previous | 2026 Updated |
|---|---|---|---|---|
| Real GDP (2018=100) | 6.20% | 5.90% | 6.20% | 6.20% |
| Inflation (2018=100) | 3.20% | 3.40% | 3.00% | 3.00% |
| USDPHP | 57.9 | 57.9 | 56.5 | 56.5 |
| BSP RRP | 5.00% | 5.25% | 4.25% | 4.50% |
| Fed Funds Rate | 3.75% | 4.00% | 3.00% | 3.25% |
BSP finding the right temperature
In line with the Philippine inflation forecast update, we see cumulative 50-bps worth of policy rate cuts by the Bangko Sentral ng Pilipinas (BSP) in 2025, with a possible additional 25 bps cut should monetary authorities find need to further support the economy.
In a recent statement, BSP Governor Eli Remolona Jr. also hinted at a cumulative half-point reduction this year, adding that a 75-bps cut for this year may be “too much”.
We maintain our view of a total of 75-bps worth of cuts by the BSP next year.
Impact on GDP
We revise our 2025 gross domestic product (GDP) forecast downward. The higher inflation forecasts and the expected less-dovish stance by the BSP for the year are expected to weigh on growth amid a relatively less pronounced impact on consumer and investment spending.
We keep our GDP growth estimate for 2026 on account of lagged effects of the BSP’s continued monetary easing.
(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)