BSP Governor Benjamin Diokno
MANILA – The Bangko Sentral ng Pilipinas (BSP) remains on the lookout for any second-round effects of the elevated global oil prices despite their decline from more than US80 per barrel in October.
In a virtual briefing on Friday, BSP Governor Benjamin Diokno said optimism on the efficacy of the coronavirus disease 2019 (Covid-19) vaccines boosted oil prices last year until most of this year, given the economic recovery that increased global oil demand.
Diokno said Dubai crude oil prices reached USD81.3 per barrel in October 2021 but this declined to about USD72.6 per barrel in the first two weeks of this month due in part to the emergence of the Omicron Covid-19 variant, as well as the decisions of the United States, the United Kingdom, and some Asian countries to release their reserves to address supply constraints.
He said the higher global oil prices have affected the domestic inflation rate through several items, such as petroleum, electricity, gas, and other fuel.
However, Diokno said while headline inflation is still above the government’s 2 percent to 4 percent target band, core inflation, which excludes volatile items such as food and oil, remains within target.
“This suggests that inflation is not mainly driven by demand-side pressures,” he said.
Philippine Statistics Authority data show that average inflation in the first 11 months of this year stood at 4.5 percent while core inflation was lower at 3.3 percent.
On Thursday, the central bank’s policy-making Monetary Board hiked the BSP’s average inflation forecasts for this and next year to 4.4 percent and 3.4 percent, respectively.
These were previously at 4.3 percent and 3.3 percent for 2021 and 2022, respectively.
Diokno said developments on the global oil prices have been incorporated in the latest inflation projections.
“Nonetheless, the BSP remains vigilant of any second-round effects. The potential impact of the petition for jeepney fare hikes due to higher oil prices is one of the upside risks to the inflation outlook over the near term,” he said.
Diokno said while the proposed six-month suspension of the petroleum excise tax could temporarily address the inflation rate, its “impact will likely be reversed once the excise tax rates revert to (the) previous level.” (PNA)
