Cheyenne Suarez

Rate hike possible if oil price hikes continue – BSP chief

The facade of the Bangko Sentral ng Pilipinas on February 15, 2024. Jonathan Cellona, ABS-CBN News

Article (news)

Jessica Fenol

ABS-CBN News

MANILA - Bangko Sentral ng Pilipinas Governor Eli Remolona said if crude oil prices continue to rise, this could trigger an increase in the country&#x27;s benchmark interest rate.In an interview with Bloomberg TV on March 6, the central bank chief said the environment has changed since the Philippines reduced its target reverse repurchase rate to 4.25 percent in mid February.&quot;You know things have changed quite a bit; the first risk is the risk to inflation,&quot; Remolona said.&quot;We might have to tighten, if oil prices rise sharply and persistently, then we have work to do,&quot; he added.When asked about the impact of crude oil prices breaching $100 per barrel, Remolona said: &quot;The main effect would still be inflation.&quot;Brent crude oil breached $100 per barrel earlier this week, but it has since fallen to below $90 per barrel on March 11.&quot;In peso terms, the price of oil is 10 percent higher than before; 10 percent is still manageable. If it goes up 50 percent, then that&#x27;s something we have to deal with strongly. That&#x27;s the threshold, at that price of oil, the price will begin to have effects on the prices of many commodities, and it tends to be something we have to worry about when it comes to inflation,&quot; he said.&quot;But it&#x27;s possible that a $100 per barrel, when we begin to breach what we call our tolerance range, we breach 4 percent, and then we have to do something with monetary policy,&quot; he said.Meanwhile, the central bank chief admitted that the country is growing below its &quot;potential&quot; due to a loss of confidence, which affects investments and consumption. &quot;I think we find ourselves in a circle, vicious cycle, lack of confidence affects growth, low growth affects confidence, we&#x27;re trying to get out of that. That&#x27;s why we reduced the policy rate in February,&quot; he said.But he said the economy could catch up in the second quarter.&quot;With growth, confidence comes back, it builds on itself and then we&#x27;re back to potential (growth),&quot; he added.On the peso-dollar exchange rate, Remolona said the BSP does not intervene unless necessary. This intervention, he said, would be data-driven and based on &quot;a lot of calculations and changing data.&quot;<div>--with reports from Agence France-Presse</div>

BSP Governor Eli Remolona says they may hike interest rates to control inflation if oil prices continue to rise.

BSP Governor Eli Remolona says they may hike interest rates to control inflation if oil prices continue to rise.