Rising oil prices won’t affect PH inflation rate targets —BSP

MANILA--Monetary officials remain confident that inflation in the next two years will not exceed the government’s two to four percent target band despite rising oil prices in the world market.

Oil in the international market is now above $50 per barrel.

Domestic inflation has been generally low in recent years and this is among the factors that sustain the strong expansion of the domestic economy and made it among the strongest in the region.

In September alone, the rate of price increases went up to within target level of 2.3 percent after dropping to 1.6 percent in May 2015.

However, average inflation in the first nine months this year remain below target at 1.6 percent.

The central bank projects 2016 inflation to average 1.7 percent while the target for 2017 is 2.9 percent 2017 and 2.6 percent for 2018.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo told reporters that during last September’s rate setting meeting of the central bank’s policy-making Monetary Board (MB), the 2016 assumption on oil prices is $40.50 per barrel, already below the current prices.

For 2017, the oil price assumption is $48.07 per barrel while it is $50.68 per barrel for 2018.

Guinigundo said that aside from oil price hikes overseas, other upside risks to inflation are the Duterte administration’s move to increase excise tax on fuel by about P6 and pending electricity rate increase.

He, however, said that based on their initial assessments, these domestic factors are not expected to result in a spike in inflation rate.

”At most, these factors will only increase inflation by about 0.47 percent,” he said.

Guinigundo also cited that any increase in oil prices is seen to be countered by the sluggish global economy.

“So, we are still within the inflation target of two to four percent for both years, 2017 to 2018,” he added.