BSP: Inflation target will hold despite rising pump prices

Jessica Fenol and Michelle Ong, ABS-CBN News

Posted at Mar 01 2022 11:28 AM

MANILA - Bangko Sentral Governor Benjamin Diokno on Tuesday said the country still has room to wait in terms of tightening interest rate as he allayed fears on rising oil prices due to the conflict between Russia and Ukraine.

Although the Brent crude oil breached the $100 per barrel mark following Moscow's attack on Kyiv and other major cities, the Dubai crude, which is the benchmark for the Philippines, is hovering just above the $90 per barrel.

Major oil players implemented another hike on pump prices beginning March 1, citing a spike in global prices.

In an interview with ANC, Diokno said as long as the Dubai crude remains below $95 per barrel, the inflation target of 2 to 4 percent could hold.

"As long as the Dubai oil prices, as long as it does not exceed the $95 per barrel on a sustained basis, we’ll be okay. Our inflation target of 2 to 4 percent will hold. If crude oil prices average $95, higher than that, there may be some effect," Diokno said. 

"But it’s not going to be disastrous for the Philippines. We should be more concerned with food rather than oil because oil is not a big part of our consumption index," he added.

Inflation in January eased to 3 percent, while a slight increase is projected for February.

The country's interest rate was kept at its record low of 2 percent in February as the BSP waits out for the right conditions to ease stimulus.

The BSP is also not rushing on tightening monetary policy since the country remains in good shape, Diokno said. 

"We can afford to wait because we want to make sure that our recovery is stable and can be sustained," he said.

"Things are looking good for us, we still have some space," he added.

Despite the rising pump prices, inflation is seen to remain within target for the first half of the year before slightly overshooting the 4 percent band in the second half, Diokno said. 

Although it is too early to speculate on what would be the impact of Russia's invasion of Ukraine on the Philippine economy, the BSP said it will closely monitor the development.

The Bank of Russia on Monday hiked its benchmark interest rate to 30 percent from 9.5 percent as the Rouble plummeted. 

Diokno said it was a move to protect its currency as its dollar reserves deplete. 

More details to follow.

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