'Oil at $100 may force BSP to hike interest rates '

The Bangko Sentral ng Pilipinas may be forced to raise interest rates if global oil prices surge to around $100 per barrel, as higher energy costs could push inflation beyond the BSP’s target range.

- By KEISHA TA-ASAN

BSP Governor Eli Remolona Jr. said the recent escalation of tensions in the Middle East has introduced new risks to the inflation outlook, which could compel the central bank to respond.

“It’s possible that at $100 a barrel, we will begin to breach what we call our tolerance range (of inflation at four percent),” Remolona said in an interview with Bloomberg TV.

The BSP chief said the $100-per-barrel level represents a threshold where higher oil prices could start feeding into the cost of other commodities, amplifying inflationary pressures.

This will likely require policy action if inflation rises beyond the central bank’s two to four percent target band.

Remolona acknowledged that the central bank could face difficult policy choices if the surge in oil prices persists.

“We might have to tighten,” he said, referring to a scenario wherein crude prices rise sharply and remain elevated.