BSP: Measures in place to 'mitigate' inflationary pressure of oil prices
MANILA, Philippines — The Bangko Sentral ng Pilipinas has assured the public that any inflationary pressures from rising international oil prices can be “mitigated to a large extent," even as traders see oil price hitting $100 a barrel soon amid tensions in the Middle East.
Philippine inflation —which is now higher than the rest of Asia — jumped to an over nine-year high of 6.4 percent in August, amid food supply bottlenecks and as the recent surge in oil prices added pressure on the country, a net importer of oil.
In the first eight months, inflation averaged 4.8 percent, well above the central bank's 2-4 percent target range for the year.
US sanctions on Iran
Meanwhile, Reuters reported that some analysts expect oil prices to spike above $100 per barrel towards the end of 2018 or by early 2019, as US President Donald Trump’s sanctions against Iran, a major crude exporter, take effect in November.
Asked how Philippine inflation will be affected under a $100-per-barrel-oil scenario, BSP Deputy Governor Diwa Guinigundo told CNBC that the government has “other measures” to fight possible price pressures stoked by high oil prices.
“All other things being equal, a one-percent increase in global oil prices will generate about 0.03 percentage points in inflation. But in the Philippines, we have other measures that would mitigate this possible pressures coming from the oil side,” Guinigundo explained.
“As you know, inflation in the Philippines for the last eight months of the year was supply-driven, particularly food commodities like rice, meat, fish and vegetables. And we have done a lot of mitigating measures to make sure that food prices will continue to be more or less stable for the rest of the year,” he added.
“So, any inflation pressures coming from the oil side will be mitigated to a large extent.”
Oil price increases
Global oil prices have risen this year, translating to higher local pump prices.
Data from the Department of Energy show most oil companies imposed a per liter price hike of P0.50 for gasoline, P0.20 for kerosene and P0.15 for diesel last September 18. Year-to-date, domestic oil prices have risen by P9.00/liter for gasoline and P9.15/liter for diesel.
source: tradingeconomics.com
The central bank has raised its policy rates by a cumulative 100 basis points from May to August, with the intention of tempering consumer demand that likely lifted commodity prices. Monetary authorities have also vowed to undertake “strong action” in their rate-setting meeting on Thursday.
In a bid to fight inflation, President Rodrigo Duterte, who is facing public backlash over spiralling commodity prices, recently issued orders seeking to allow more supply of farm products in local markets.
According to BSP’s Guinigundo, policymakers expect inflation to start easing in the last quarter of the year. — Ian Nicolas Cigaral
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