The Bangko Sentral ng Pilipinas (BSP) said just this week that higher global oil prices are not unexpected and are already factored into its policy planning. This develops as it assesses the impact on inflation, economic growth, and the future path of monetary easing.
BSP governor Eli Remolona Jr. said the central bank incorporates multiple oil price benchmarks, including Dubai crude and Platts, in building scenarios to guide decisions. Current projections indicate a near-term spike in oil prices, with some moderation seen toward 2026–2027, though levels are expected to remain elevated.
The BSP said rising oil prices will likely push inflation higher while dampening economic activity, as supply-driven pressures reduce the effectiveness of interest rate adjustments. It expects inflation to accelerate in the second half of 2026, potentially exceeding the 4 percent target ceiling, as higher fuel costs spill over into transport, food, and other goods. Inflation is estimated at around 3.5 percent in March and could climb to about 5 percent in April before easing back within target by 2027.
Amid these risks, the central bank revised its growth forecast for 2026 to 4.4 percent from 4.6 percent, citing weaker investment and household consumption due to external challenges. Growth is projected to recover to 5.9 percent in 2027, with fiscal support seen as critical in cushioning the economy.
In an off-cycle move this week, the BSP kept its policy rate unchanged, signaling caution in its easing cycle as oil-driven inflation limits the impact of monetary policy. Remolona said the Monetary Board held extensive discussions before deciding to pause, emphasizing a data-dependent approach given elevated uncertainty.
The peso’s recent weakness near P60 against the US dollar has not triggered significant intervention, with the BSP noting that a softer currency can help exports and narrow the current account deficit. The central bank said it will continue to focus on smoothing volatility rather than defending a specific exchange rate level.
Looking ahead, the BSP said it stands ready to adjust policy if second-round inflation effects emerge or if expectations become unanchored, particularly through higher transport fares, food prices, and broader cost pass-through. It also signaled the possibility of targeted regulatory relief measures to support lending to vulnerable sectors if needed.
Overall, the BSP underscored that monetary policy has limited ability to counter supply-side shocks such as oil price increases, highlighting the importance of fiscal measures in sustaining growth while maintaining price stability.
