Philippines Core Inflation Rate YoY: December 2025 Analysis and Macro Outlook
The Philippines’ latest Core Inflation Rate YoY for December 2025 registered at 2.40%, slightly below the 2.50% estimate and previous month’s 2.50%. This subtle decline continues a trend of moderate easing since mid-year, reflecting underlying price stability amid evolving domestic and external pressures. This report leverages data from the Sigmanomics database, comparing recent prints with historical trends and assessing implications for monetary policy, fiscal stance, and financial markets.
Table of Contents
The Philippines’ core inflation rate, which excludes volatile food and energy prices, is a key gauge of underlying price pressures. The 2.40% YoY reading for December 2025 marks a slight dip from November’s 2.50%, continuing a mild downward trajectory from the 2.70% peak in September. This signals a gradual easing of inflationary pressures amid a complex macroeconomic environment shaped by domestic demand, monetary policy tightening, and external shocks.
Drivers this month
- Shelter costs contributed 0.15 percentage points, reflecting steady housing demand.
- Transport and fuel-related prices eased, subtracting 0.10 percentage points.
- Services inflation remained stable, supporting the core rate’s resilience.
Policy pulse
The 2.40% core inflation remains within the Bangko Sentral ng Pilipinas’ (BSP) target range of 2–4%, suggesting that current monetary policy settings are broadly appropriate. The slight undershoot relative to estimates may reduce immediate pressure for further rate hikes but keeps the door open for cautious adjustments depending on incoming data.
Market lens
Immediate reaction: The Philippine peso (PHP) strengthened modestly by 0.30% against the US dollar within the first hour post-release, reflecting market relief at the contained inflation print. Short-term government bond yields edged down by 5 basis points, signaling eased inflation risk premiums.
Core inflation is a foundational macroeconomic indicator that informs monetary policy and financial market expectations. The 2.40% YoY reading for December 2025 compares with a 12-month average of approximately 2.40%, underscoring a stable inflation environment over the past year. This contrasts with the 2.60% recorded in February 2025 and the 2.70% peak in September, highlighting a mild but consistent easing trend.
Monetary Policy & Financial Conditions
The BSP has maintained a cautious stance since mid-2025, with policy rates steady at 5.25%. The core inflation trajectory supports this approach, balancing inflation control with growth support. Financial conditions remain moderately tight, with lending rates stable and credit growth steady at 8% YoY.
Fiscal Policy & Government Budget
Fiscal policy remains expansionary, with the government targeting infrastructure and social spending to support growth. The 2025 budget deficit is projected at 3.50% of GDP, slightly above the 3.20% average of the prior three years. This fiscal stance complements monetary policy by sustaining demand without overheating the economy.
External Shocks & Geopolitical Risks
Global commodity price volatility and geopolitical tensions in the Asia-Pacific region continue to pose upside risks to inflation. However, the Philippines’ diversified import sources and stable remittance inflows provide buffers. The recent easing in oil prices has helped temper transport and energy costs, reflected in the core inflation moderation.
Market lens
Immediate reaction: Philippine government bond yields declined by 5 basis points, reflecting reduced inflation risk. The PHP/USD exchange rate appreciated by 0.30%, signaling investor confidence in the inflation outlook. Breakeven inflation rates for two-year bonds edged lower, consistent with the core inflation moderation.
This chart highlights a clear trend of core inflation stabilizing around 2.40%, reversing the upward pressure seen in mid-2025. The moderation suggests that monetary policy measures and external price relief are effectively containing inflationary risks.
Looking ahead, the core inflation trajectory will depend on several factors, including global commodity prices, domestic demand, and policy responses. The baseline scenario projects core inflation holding near 2.40–2.50% over the next six months, supported by stable services inflation and easing transport costs.
Bullish scenario (20% probability)
- Global commodity prices fall sharply, easing input costs.
- Monetary policy remains accommodative, supporting growth without inflation spikes.
- Fiscal stimulus boosts productive capacity, reducing cost-push pressures.
Base scenario (60% probability)
- Core inflation remains stable around 2.40–2.50%.
- Monetary policy holds steady, with minor adjustments if needed.
- External shocks remain contained, with moderate volatility in energy prices.
Bearish scenario (20% probability)
- Geopolitical tensions disrupt supply chains, pushing input costs higher.
- Fiscal expansion overheats demand, triggering inflation spikes above 3%.
- Monetary policy lags, requiring sharper rate hikes later.
The Philippines’ core inflation rate of 2.40% YoY in December 2025 reflects a stable and manageable inflation environment. This supports the BSP’s current monetary stance and provides room for measured policy calibration. However, vigilance is warranted given external uncertainties and fiscal dynamics. Financial markets have responded positively, with the peso strengthening and bond yields easing. Structural trends such as urbanization and digitalization continue to shape inflation dynamics over the long run.
Investors and policymakers should monitor commodity prices, geopolitical developments, and domestic demand closely. The balance of risks suggests a cautious but optimistic outlook for inflation and economic growth in the Philippines.
Key Markets Likely to React to Core Inflation Rate YoY
The core inflation rate in the Philippines is closely watched by currency traders, bond investors, and equity markets. Key markets that historically track this indicator include the Philippine peso (PHP/USD), local government bonds, and select equities sensitive to inflation and interest rates. Movements in these markets often reflect shifts in inflation expectations and monetary policy outlook.
- PHPUSD – The Philippine peso’s exchange rate is sensitive to inflation data, influencing capital flows and import costs.
- ALI – Ayala Land, a major real estate player, is impacted by inflation-driven housing demand and interest rates.
- SM – SM Investments Corporation’s retail and property segments respond to consumer price trends.
- BTCUSD – Bitcoin often acts as an inflation hedge, with price movements linked to inflation expectations globally.
- USDPHP – The inverse of PHPUSD, relevant for importers and exporters managing currency risk.
Insight: Core Inflation vs. PHPUSD Exchange Rate Since 2020
Since 2020, the PHPUSD exchange rate has shown a moderate inverse correlation with the Philippines’ core inflation rate. Periods of rising core inflation often coincide with peso depreciation, reflecting concerns over purchasing power. Conversely, easing core inflation tends to support peso appreciation. This relationship underscores the importance of inflation data in shaping currency market sentiment and capital flows.
FAQ
- What is the Core Inflation Rate YoY for the Philippines?
- The Core Inflation Rate YoY for the Philippines in December 2025 is 2.40%, indicating underlying price stability excluding volatile items.
- How does the Core Inflation Rate affect monetary policy in the Philippines?
- The BSP uses core inflation as a key guide for setting interest rates to balance growth and price stability, aiming to keep inflation within 2–4%.
- What are the main risks to the Philippines’ inflation outlook?
- Risks include global commodity price shocks, geopolitical tensions, and fiscal policy overshoot, which could push inflation above target.
Key Takeaway: The Philippines’ core inflation rate at 2.40% YoY signals stable price pressures, supporting a steady monetary policy stance amid manageable risks.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The December 2025 core inflation rate of 2.40% YoY is down from November’s 2.50% and aligns with the 12-month average of 2.40%. This marks a continuation of a mild easing trend since the September peak of 2.70%. The monthly data show a steady deceleration in inflationary pressures, particularly in transport and fuel-related components.
Compared to the February 2025 high of 2.60%, the current reading suggests that inflation expectations are well-anchored. The core rate’s stability contrasts with headline inflation, which remains more volatile due to food and energy price swings.