Philippines CPI December 2025: Moderation Amid Persistent Inflationary Pressures
The Philippines’ Consumer Price Index (CPI) rose 2.40% YoY in December 2025, easing from 2.50% in November but above the 12-month average of 1.70%. Core inflation remains sticky amid supply chain disruptions and elevated food prices. Monetary policy faces a delicate balance as the Bangko Sentral ng Pilipinas (BSP) weighs inflation risks against growth concerns. External shocks and geopolitical tensions continue to cloud the outlook, while fiscal stimulus and government spending remain supportive. Financial markets showed muted reaction, reflecting cautious sentiment. Structural trends suggest inflation may stay above target in the near term.
Table of Contents
The latest CPI release for the Philippines, dated December 5, 2025, showed a year-on-year inflation rate of 2.40%, down slightly from 2.50% in November but still elevated relative to the 12-month average of 1.70% recorded over the past year. This moderation signals a tentative easing of inflationary pressures but remains above the Bangko Sentral ng Pilipinas’ (BSP) target range of 2-4%.
Drivers this month
- Food and non-alcoholic beverages contributed 0.90 percentage points (pp), driven by persistent supply constraints.
- Transport costs added 0.50 pp, reflecting higher fuel prices amid global energy volatility.
- Housing and utilities contributed 0.40 pp, supported by rising rental costs.
- Core inflation components excluding volatile food and energy remained steady at 2.10% YoY.
Policy pulse
The 2.40% inflation reading remains within the BSP’s target corridor but signals a stickier inflation environment than the 1.70% average over the past year. The central bank has maintained a cautious stance, keeping policy rates steady at 5.25% since September 2025, balancing inflation containment with growth support.
Market lens
In the first hour after the CPI release, the Philippine peso (PHP) depreciated marginally by 0.10% against the USD, while 2-year government bond yields edged up 3 basis points. Breakeven inflation rates for the next 12 months held steady near 2.30%, reflecting market expectations of moderate inflation persistence.
The CPI data aligns with other core macroeconomic indicators showing moderate growth and inflation pressures. GDP growth for Q3 2025 was reported at 6.10% YoY, slightly below the 6.30% average for the past four quarters but still robust. Unemployment remains low at 4.50%, supporting domestic demand.
Monetary Policy & Financial Conditions
The BSP’s policy rate has been on hold since September 2025, reflecting a wait-and-see approach amid mixed inflation signals. Financial conditions remain accommodative, with credit growth at 8.20% YoY, supporting consumption and investment. Inflation expectations remain anchored but slightly elevated compared to early 2025.
Fiscal Policy & Government Budget
Fiscal policy continues to be expansionary, with the government increasing infrastructure spending by 12% YoY in Q4 2025. The budget deficit widened slightly to 3.80% of GDP, reflecting stimulus efforts to sustain growth amid global uncertainties.
External Shocks & Geopolitical Risks
Global energy price volatility and supply chain disruptions, particularly in food commodities, have pressured inflation. Geopolitical tensions in the South China Sea and trade uncertainties with key partners add to external risks, potentially impacting import prices and investor sentiment.
Drivers this month
- Food prices: 0.30% MoM, reflecting supply chain bottlenecks.
- Fuel and transport: 0.40% MoM, influenced by global oil price fluctuations.
- Housing and utilities: 0.20% MoM, due to seasonal rental adjustments.
Policy pulse
The CPI trajectory suggests inflation remains manageable but with upside risks. The BSP’s current stance is likely to persist until clearer disinflation signals emerge. Inflation expectations for 2026 hover around 2.50%, slightly above the target midpoint.
Market lens
Immediate reaction: PHP/USD weakened 0.10%, while 2-year bond yields rose 3 bps, reflecting cautious investor positioning amid inflation persistence.
This chart highlights a gradual upward trend in inflation since mid-2025, reversing a two-month decline. The persistence of food and transport inflation underscores ongoing supply-side constraints and external price pressures.
Looking ahead, inflation in the Philippines faces a complex mix of domestic and external factors. Supply chain normalization may ease food price pressures, but global energy volatility and geopolitical risks could sustain headline inflation above the BSP’s 2-4% target range.
Bullish scenario (20% probability)
- Global commodity prices stabilize or decline.
- Supply chains improve, easing food inflation.
- BSP maintains accommodative policy, supporting growth.
- Inflation falls toward 2% by mid-2026.
Base scenario (60% probability)
- Moderate inflation persistence around 2.50% YoY.
- Gradual normalization of supply chains.
- Monetary policy remains on hold with possible mild tightening in H2 2026.
- GDP growth steady near 6%.
Bearish scenario (20% probability)
- Renewed global energy shocks push fuel prices higher.
- Geopolitical tensions disrupt trade flows.
- Inflation accelerates above 3.50%, forcing BSP rate hikes.
- Growth slows to below 5% due to tighter financial conditions.
The Philippines’ December 2025 CPI reading of 2.40% reflects a cautiously optimistic inflation outlook. While headline inflation has moderated slightly, core pressures and external risks remain. The BSP’s balanced approach to monetary policy will be critical in navigating these dynamics. Fiscal stimulus and structural reforms will also shape the medium-term inflation trajectory. Market participants should monitor commodity prices, geopolitical developments, and domestic demand trends closely.
Key Markets Likely to React to CPI
The Philippine peso (PHP) and local government bonds are primary markets sensitive to CPI fluctuations. Inflation surprises can influence BSP policy expectations, impacting bond yields and currency valuation. Additionally, global energy-linked assets like XOM (Exxon Mobil) correlate with fuel price-driven inflation components. The USD/PHP forex pair reacts to inflation data through interest rate differentials. Crypto assets such as BTCUSD may reflect risk sentiment shifts tied to macroeconomic stability. Lastly, regional equities like SM (SM Investments) are sensitive to domestic consumption trends influenced by inflation.
Indicator vs. PHP/USD Since 2020
Since 2020, the Philippines CPI and PHP/USD exchange rate have shown a moderate inverse correlation. Periods of rising inflation often coincide with PHP depreciation due to expectations of BSP tightening and external pressures. For example, the 2023 inflation spike to 4.50% YoY coincided with a 5% PHP depreciation against the USD. This relationship underscores the importance of inflation data for currency traders and policymakers alike.
FAQs
- What is the current CPI reading for the Philippines?
- The latest CPI for December 2025 is 2.40% year-on-year.
- How does the CPI affect the Bangko Sentral ng Pilipinas’ policy?
- The CPI guides BSP’s interest rate decisions to balance inflation control and economic growth.
- What are the main inflation drivers in the Philippines?
- Food prices, transport costs, and housing are key contributors to inflation dynamics.
Key takeaway: The Philippines’ inflation shows signs of moderation but remains elevated, requiring vigilant policy calibration amid external uncertainties.
XOM – Energy sector giant influencing fuel price-driven inflation.
SM – Major Philippine conglomerate sensitive to domestic consumption trends.
USDJPY – Proxy for global risk sentiment impacting emerging market currencies.
BTCUSD – Reflects risk appetite shifts linked to macroeconomic stability.
USDPHP – Directly tracks Philippine peso valuation against the US dollar.
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 CPI print of 2.40% YoY marks a slight decline from November’s 2.50%, yet remains above the 12-month average of 1.70%. Month-on-month (MoM) inflation edged up 0.20%, indicating ongoing price pressures despite moderation in headline inflation.
Food inflation, the largest CPI component, rose 3.10% YoY, compared to 3.40% in November and a 12-month average of 2.50%. Transport inflation accelerated to 4.00% YoY from 3.60%, driven by fuel price rebounds. Core inflation held steady at 2.10%, consistent with the BSP’s inflation target midpoint.