BSP watches Middle East conflict for inflation risks
The Bangko Sentral ng Pilipinas (BSP) said it was closely monitoring the conflict in the Middle East and its potential impact on domestic inflation and economic activity, adding that it will remain data-dependent in using its monetary policy tools to preserve stability.
In a statement issued after new figures showed inflation accelerated to a 13-month high in February, the central bank said it would ensure that policy settings remain consistent with its goal of maintaining price stability while supporting sustainable growth and employment.
“The Monetary Board will remain vigilant and guided by incoming data, particularly on inflation,” the BSP said. “We are watchful of recent developments in the Middle East for their implications on near-term inflation and economic activity.”
Violence escalated over the weekend after the United States and Israel attacked Iran, which retaliated and targeted Israel and neighboring countries hosting American forces, including the United Arab Emirates, Qatar, Kuwait, Bahrain, Iraq, Jordan and Saudi Arabia.
The conflict has also disrupted traffic through the Strait of Hormuz, a narrow but critical shipping route that carries a large share of global oil exports. The disruption has raised concerns about potential supply shocks that could be felt by energy-importing economies such as the Philippines.
President Marcos is seeking emergency powers from Congress to allow him to reduce the excise tax on petroleum products should Dubai crude exceed $80 a barrel. Looking ahead, the BSP expects inflation to average 3.6 percent this year and 3.2 percent next year, suggesting that consumer prices are likely to remain stable and on target, with any supply shocks seen as temporary.
The BSP has already brought down its key policy rate to 4.25 percent, the lowest in more than three years.
In a note to clients, economists at Chinabank Research said inflation was expected to pick up quickly as geopolitical tensions persist.
