Daven Tamayo

Bangko Sentral says watching Mideast conflict closely for impact on inflation

The facade of the Bangko Sentral ng Pilipinas, adorned with a new logo featuring a gold-colored, full-bodied Philippine eagle with wings spread upward and stars positioned above,  at the Bangko Sentral Headquarters in Quezon City on February 9, 2024.Maria Tan, ABS-CBN News

Article (news)

Arthur Fuentes

ABS-CBN News

MANILA – The Bangko Sentral ng Pilipinas (BSP) on Wednesday announced it is closely monitoring the escalating conflict in the Middle East, citing potential risks to domestic inflation and financial stability ahead of its April 23 policy meeting.The central bank emphasized that maintaining price stability remains its primary mandate. Officials are currently assessing how a spike in global oil prices could trigger a &quot;second-round effect&quot; on the cost of fertilizer, transport fares, and general consumer goods.Beyond inflation, the BSP said it is also tracking the conflict’s impact on the country&#x27;s current account, specifically regarding trade and the vital flow of remittances from overseas Filipino workers (OFWs) stationed in the region.Addressing recent currency fluctuations, the BSP reiterated its commitment to a flexible exchange rate. The bank stated it would intervene in the foreign exchange market only to &quot;smooth excess volatility&quot; and ensure orderly conditions, rather than defending a specific target for the peso.Bloomberg earlier reported that the BSP intervened earlier this week as the peso neared the P60 to the US dollar -- a level that President Ferdinand Marcos Jr said he does not want the peso to breach.&quot;As always, policy will be driven by data,&quot; the central bank said, signaling that its upcoming interest rate decision will hinge on the severity of the geopolitical disruption to the Philippine economy.While the next BSP meeting will be in April, the central bank has also made an off-cycle adjustment to monetary policy before, in October 2023, raising its benchmark rate by 25 bps to curb rising inflation pressures, high food prices, and second-round effects.The central bank cut its benchmark rate by 25 basis points to 4.25 percent in its last meeting in February. The BSP also cut interest rates several times last year amid benign inflation and tepid economic growth. BSP Governor Eli Remolona, however, signaled at the start of the year that the monetary easing cycle was winding down. Inflation was already quickening this year, even before the Middle East conflict sent oil prices skyrocketing.Meanwhile, the US Federal Reserve is expected to leave interest rates unchanged as the US-Israel war on Iran sends shock waves through oil markets and supply chains, while economic data has begun to show weakness.The Fed began its two-day meeting on Tuesday, which will culminate in an announcement of the benchmark lending rate in the world&#x27;s largest economy, expected at 2 p.m. US Eastern Time on Wednesday or 2 a.m. Philippine Standard Time.<div>- With a report from Agence France-Presse</div>

The BSP said it is assessing how a spike in global oil prices could trigger a "second-round effect" on the cost of fertilizer, transport fares, and general consumer goods.

The BSP said it is assessing how a spike in global oil prices could trigger a "second-round effect" on the cost of fertilizer, transport fares, and general consumer goods.