BSP eyes rate hike amid oil surge

The Bangko Sentral ng Pilipinas (BSP) is closely monitoring developments in the Middle East ahead of the Monetary Board’s next meeting in April, as analysts expect the central bank to consider a possible shift toward tightening monetary policy in light of rising inflationary pressures and broad-based oil price hikes.

In a statement Wednesday afternoon, the BSP underscored its primary mandate of price stability — keeping inflation manageable to preserve Filipinos’ purchasing power.

“Ahead of the monetary policy meeting on 23 April 2026, the BSP is closely monitoring the impact of the Middle East conflict on Philippine inflation and the economy,” the statement read.

“Price stability is the BSP’s main mandate. As such, the BSP is assessing the potential impact of higher oil prices on fertilizer costs, transport fares and overall inflation.”

The Monetary Board approved a 25-basis-point reduction in the central bank’s key policy rate last February — the second such cut in three months — as tepid economic growth linked to the flood control scandal continued to weigh on the Philippines’ economic outlook.

Finance Secretary Frederick Go, who sits on the Monetary Board, said on Tuesday that the BSP may consider tightening — effectively reversing its recent easing stance — as inflationary pressures from Middle East-driven oil shocks continue to build.

“If oil prices remain high — if oil prices remain elevated and the situation persists for some time — the Monetary Board will most likely have to consider tightening,” Go said.

Oil prices have surged in recent weeks, with some gas stations reportedly selling diesel at over P100 per liter. The President on Wednesday also approved the suspension of increases in public transportation fares, a move aimed at easing price pressures on the daily commutes of millions of Filipinos.

The Middle East conflict has also exerted pressure on the local currency, which hit record lows three times over the past week, peaking at P59.87 per US dollar on Monday. Analysts have noted that rising inflationary pressures and peso depreciation could limit the BSP’s room for further monetary policy easing.

The peso settled at P59.52 against the dollar as of Wednesday afternoon, which the BSP said it is also monitoring, reiterating that it intervenes in the foreign exchange market only during periods of excessive volatility.

“On the peso, the BSP stresses that it operates in the foreign exchange market to smooth excess volatility and maintain orderly conditions. This is consistent with a flexible exchange rate policy, with intervention limited to tempering large swings that could affect inflation rather than defending any specific level,” it said.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael Ricafort likewise expects the central bank to explore possible tightening measures ahead of the Board’s meeting if oil prices continue to rise.

“The BSP may tighten its monetary policy or raise rates in April 2026 if oil prices continue to increase. If oil prices remain at elevated levels, it is most likely that the BSP Monetary Board will consider tightening at its next meeting,” he said.

Meanwhile, Go said on Tuesday that the Philippine government is moving to secure up to 2 million barrels of fuel as escalating conflict in the Middle East threatens global energy flows and drives prices higher.

“The primary objective, of course, is to create that buffer stock — additional buffer stock. Also, when you put out a large order into the global market, the belief is you should be able to achieve economies of scale and procure at lower prices,” he said.