Oil price spike seen 'secondary' to inflation data in BSP rate-setting meeting

ABS-CBN News

Posted at Sep 18 2019 02:41 PM

MANILA - The spike in global oil prices resulting from the attack on a key Saudi Arabian facility is of "secondary importance" next to inflation data when the Bangko Sentral ng Pilipinas meets to set interest rates next week, BSP Governor Benjamin Diokno said Wednesday. 

"As long as the oil price spike is transitory and less than $85 per barrel, then it should be of secondary importance. The most important piece of information for policy decision is the forecasted inflation rate in September," Diokno told ABS-CBN News.

Diokno said the impact of oil supply disruption will form part of the BSP brief next week during the Monetary Board's policy meeting. But he added that it will be just one of the factors that would be the basis for the Board's policy decision.

Analysts expect the BSP to slash its key rate again next week. 

World crude oil prices need to hit $85 per barrel before the 2 to 4 percent inflation target can be breached, Diokno said. 

Another rate cut may happen on Sept. 26 as the peso remains stable and as inflation continues to ease, BDO Unibank chief market strategist Jonathan Ravelas said. 

Regina Capital head of sales Luis Limlingan also said the Saudi attack won't have a significant impact on the BSP decision unless more attacks occur. 

The 25-basis points cut in August brought overnight borrowing rates to 4.25 percent

Inflation slowed to 1.7 percent in August, from 2.7 percent in July. 

Saturday's attack on Saudi Arabia's oil facility reduced output by 5.7 million barrels per day or equivalent to 5 percent of global supplies, Reuters reported. 

But the Saudi government on Tuesday said it was close to restoring 70 percent of supply. Full restoration is expected before the end of the month, the Saudi government said. 

Energy Secretary Alfonso Cusi earlier said the country has enough oil supply "to keep the economy running." 

-- with a report from Reuters