The Philippines’ inflation rate YoY for December 2025 registered at 1.50%, down from 1.70% in November and October, and below the consensus estimate of 1.60%. This figure continues the easing trend observed since February 2025, when inflation peaked at 2.90%. The latest data from the Sigmanomics database confirms a softening price environment amid moderate economic growth and stable commodity prices.

Drivers this month

• Energy prices stabilized, contributing -0.10 percentage points (pp) to inflation moderation.
• Food inflation eased, reflecting improved supply chains and seasonal harvests, subtracting 0.15 pp.
• Core inflation components such as housing and transport remained steady, adding 0.30 pp.

Policy pulse

The Bangko Sentral ng Pilipinas (BSP) continues to target a 2% inflation midpoint with a tolerance band of ±1%. The 1.50% reading sits comfortably below the target range, allowing the BSP to maintain its accommodative monetary stance while monitoring upside risks from global commodity volatility.

Market lens

Immediate reaction: The Philippine peso (PHP) appreciated modestly by 0.30% against the USD within the first hour post-release, reflecting relief at the lower-than-expected inflation print. Local bond yields on the 2-year tenor declined by 5 basis points, signaling reduced inflation risk premia.

Core macroeconomic indicators provide context for the inflation trajectory. GDP growth for Q3 2025 was reported at 5.10% YoY, slightly below the 5.30% average for the past year but still robust. Unemployment remains low at 4.20%, supporting consumer spending. The balance of payments shows a stable current account deficit of 2.50% of GDP, buffered by remittance inflows and export growth.

Monetary policy & financial conditions

The BSP’s policy rate remains at 3.50%, unchanged since mid-2025. Financial conditions are accommodative, with ample liquidity and stable credit growth of 7.80% YoY. Inflation expectations for the next 12 months hover around 2.10%, slightly above the current print but within the target band.

Fiscal policy & government budget

Fiscal policy remains expansionary, with the government running a budget deficit of 3.80% of GDP in 2025. Infrastructure spending and social programs continue to support demand, but the government is cautious about overheating risks. Tax reforms aim to broaden the base without stoking inflationary pressures.

External shocks & geopolitical risks

Global commodity prices have stabilized after mid-year volatility, easing imported inflation risks. However, geopolitical tensions in the South China Sea and trade uncertainties with key partners remain downside risks. The Philippines’ diversified trade portfolio and strategic partnerships mitigate some exposure.

Food and energy prices have been the main drivers of this moderation, with food inflation dropping from 3.20% YoY in mid-2025 to 1.80% currently. Energy inflation has stabilized near 0.50%, down from 2.00% earlier in the year. Core inflation components have remained stable, indicating underlying price stability.

Market lens

Immediate reaction: The PHP strengthened by 0.30% versus the USD, while 2-year government bond yields declined by 5 basis points. This reflects market confidence in the inflation outlook and reduced expectations of aggressive monetary tightening.

Looking ahead, the inflation outlook for the Philippines is shaped by multiple factors. The baseline scenario projects inflation to remain near 1.50–1.80% over the next six months, supported by stable commodity prices and moderate demand growth.

Bullish scenario (20% probability)

• Global commodity prices decline sharply, pushing inflation below 1.20%.
• Stronger peso appreciation reduces import costs.
• Monetary policy remains accommodative, supporting growth without inflation spikes.

Base scenario (60% probability)

• Inflation stabilizes between 1.50% and 1.80%.
• Fiscal stimulus continues but is balanced by monetary vigilance.
• External shocks remain contained.

Bearish scenario (20% probability)

• Geopolitical tensions disrupt supply chains, pushing inflation above 2.50%.
• Commodity price shocks increase imported inflation.
• Monetary tightening accelerates, risking growth slowdown.

Overall, the inflation environment is expected to remain benign, but policymakers must remain alert to upside risks from external shocks and fiscal expansion.

The Philippines’ inflation rate YoY at 1.50% in December 2025 reflects a stable and moderate price environment. This is a positive signal for consumers and investors, suggesting that inflationary pressures are well-contained. The BSP’s accommodative stance, combined with prudent fiscal management, supports this outlook.

Structural trends such as digitalization, improved supply chain resilience, and diversified trade partnerships underpin long-run inflation moderation. However, vigilance is warranted given geopolitical uncertainties and potential commodity price volatility.

In summary, the inflation print supports a cautiously optimistic macroeconomic outlook for the Philippines, balancing growth and price stability in a complex global environment.

Key Markets Likely to React to Inflation Rate YoY

The Philippines’ inflation rate YoY is closely watched by currency traders, bond investors, and equity markets. Inflation trends influence monetary policy expectations, impacting asset prices and capital flows. Below are five tradable symbols with historical sensitivity to Philippine inflation data:

• USDPHP – The USD/PHP currency pair typically reacts to inflation surprises, with lower inflation supporting PHP appreciation.
• ALI – Ayala Land Inc., a major real estate player, is sensitive to inflation-driven interest rate changes affecting property demand.
• SM – SM Investments Corporation’s retail and banking arms respond to inflation and consumer spending trends.
• BTCUSD – Bitcoin often acts as an inflation hedge and can react to shifts in inflation expectations globally.
• EURUSD – The Euro-Dollar pair is influenced by global inflation trends and monetary policy divergence, indirectly affecting emerging market currencies like PHP.

FAQs

What is the current inflation rate YoY for the Philippines?

The latest inflation rate YoY for the Philippines is 1.50% as of December 2025, down from 1.70% in November.

How does inflation affect the Philippine peso?

Lower inflation tends to strengthen the Philippine peso by reducing expectations of monetary tightening and improving purchasing power.

What are the main risks to inflation in the Philippines?

Key risks include global commodity price shocks, geopolitical tensions, and fiscal stimulus overshooting demand.

Takeaway: The Philippines’ inflation rate easing to 1.50% signals a stable price environment, supporting steady growth and a balanced policy approach amid global uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.