Policy cut today still possible

Experts claim inflation was not likely affected much by the oil price hikes as the country’s dependence on the commodity, particularly the energy/electricity sector

The attack on oil production facilities in parts of the world notwithstanding, the phased adjustment in the rate at which the Bangko Sentral ng Pilipinas borrows from or lends to banks at its 26 September meeting remains on the table, BSP Governor Benjamin Diokno said.

According to him, inflation, a key input in the decision-making process, should remain within the target range this year despite the oil price spike the past few days as a result of the attack on Saudi oil facilities.

“As long as it does not exceed $85 per barrel, we are still within our inflation target of 2 to 4 percent. Quick price adjustments are seen but after a week or two, it will return to normal,” Diokno told reporters at the sidelines of renewed relations between the fintech PayMaya and McDonald’s Philippines.

Brent crude oil prices have fallen almost 7 percent to $64.46 per barrel since the day of the attack. This deteriorated further to $71.95 a barrel on Monday, reflecting a 19.5 percent hike over its previous rate.

Still, experts claim inflation was not likely affected much by the oil price hikes as the country’s dependence on the commodity, particularly the energy/electricity sector, has diminished the past years with the expanding role played by renewable energy sources in recent years.

In terms of further easing in the banks’ reserve requirement ratio (RRR), the BSP chief said this remains an “active issue” and could come either simultaneously with the policy reduction or after the remaining 25 basis point cut bared earlier.

“Next (RRR) cut might be 100 basis points. It is an active issue so we can discuss it anytime,” Diokno said.

“It could happen in tandem (with the policy cut). Remember, we have a meeting on Thursday and we also have a meeting on Friday? We can announce it but not necessarily effective on the same day,” he added.

The BSP previously eased on the monetary levers a total of 50 basis points this year and reduced its borrowing rate from 4.75 percent to just 4.25 percent.