Go: April rate hike likely amid oil shock

By Katherine K. Chan, Reporter

ELEVATED OIL PRICES and prolonged disruptions amid the widening Middle East war may prompt the Bangko Sentral ng Pilipinas (BSP) to raise the key policy rate as early as its April meeting, Finance Secretary Frederick D. Go said.

“If the price of oil continues to persist at elevated levels, it is most likely that the Monetary Board will consider tightening in the next meeting,” Mr. Go, who is also a Monetary Board member, said in an interview with Bloomberg TV on Tuesday.

The Monetary Board will hold its next rate-setting meeting on April 23.

If realized, it would be the BSP’s first rate hike in over two years or since October 2023.

The Monetary Board has been on an easing path since August 2024, slashing the benchmark policy rate by a total of 225 basis points (bps) to an over three-year low of 4.25%.

It last cut key borrowing costs by 25 bps in February, marking its sixth straight reduction as it sought to recover lost confidence from the flood control corruption scandal.

Mr. Go said a Middle East conflict lasting over six months will take a huge toll on the economy, but anything less will likely trim at most 10 bps from Philippine gross domestic product (GDP) growth.

Economic managers are targeting 5-6% GDP growth this year, and 5.5%-6.5% for 2027.

Meanwhile, BSP Deputy Governor Zeno Ronald R. Abenoja said external headwinds from the widening Middle East war may have derailed the central bank’s projections of an economic recovery due to the potential spillover risks from recent oil price surges.

“This year, we thought we were having a good momentum in terms of stabilizing the overall macroeconomic environment and some push or some momentum in economic activity. And then we have this external shock coming from the Middle East,” he said during the Philippine Stock Exchange’s InvestPH conference in Taguig City on Tuesday.

Mr. Abenoja noted that the BSP is open to supporting the economy through monetary policy amid looming economic risks from the ongoing war.

“We continue to be very much aware of the impact of the sharp and sustained increase in oil prices over the past three weeks. And in particular for us, we are watchful for the spillover effects of this increase in oil prices,” the deputy governor said.

“If needed, we should be able to respond in terms of monetary policy in terms of supporting financial markets in our economy,” he added.

INFLATION TO HEAT UP
In a separate report, ING Think said prolonged oil shocks could push Philippine inflation towards 4% or the upper end of the central bank’s target range.

“The Philippines remains one of the most oil‑exposed economies in the region and is likely to feel higher oil prices sooner than most Asian counterparts such as Thailand or Indonesia, given its modest fuel buffers, rapid domestic price pass‑through and a structurally wider current account deficit,” ING Regional Head of Research for Asia-Pacific Deepali Bhargava, Senior Economist for South Korea and Japan Min Joo Kang, and Chief Economist for Greater China Lynn Song said late Monday.

“In our scenario of sustained oil disruptions for a month, CPI inflation for the Philippines is expected to inch closer to (the) upper end of 4% of Bangko Sentral ng Pilipinas’ target range,” they added.

Local fuel retailers hiked pump prices anew on Tuesday, with gasoline up by P12.90 to P16.60 per liter, diesel by P20.40 to P23.90 per liter and kerosene by P6.90 to P8.90 per liter.

This could bring gasoline prices to as much as P91.60 per liter, diesel up to P114.90 per liter and kerosene to P143.79 per liter, according to the Department of Energy.

The country sources about 98% of its crude oil from the Middle East, making it vulnerable to sharp price swings caused by disruptions from the war in the region.

Now in its third week, the Middle East war continues to jolt global oil markets, especially amid ongoing attacks and Iran’s move to block the Strait of Hormuz, a vital oil transit point for almost a fifth of global oil shipments, from the US, Israel and their allies.

Emerging price pressures, the bank’s think tank added, may force the BSP to stand pat despite a still sluggish economy.

WEAK PESO
Meanwhile, ING said the Philippine peso will likely stay in the P59-a-dollar level over the next year as energy shocks from the Middle East war continue to weigh on the local currency.

ING economists noted that the peso may trade at P59.80 against the greenback in the month ahead before strengthening to settle at P59 by yearend.

“Risk of further oil disruptions should keep peso weaker versus the USD (US dollar),” they said.

Oil price hikes amid the escalating Iran-Israel-US war dragged the peso 13.50 centavos lower to close at a new all-time low of P59.87 versus the greenback on Monday, Bankers Association of the Philippines data showed. It also hit its worst intraday low after peaking P59.95 during the late session.

BSP Governor Eli M. Remolona, Jr. told Bloomberg News that the central bank intervened in the foreign exchange market, preventing the local unit from plunging to the P60-a-dollar level.

The central bank chief earlier said that they only step in the foreign exchange market when the peso’s depreciation triggers inflation concerns.

ING also noted that it now sees the Philippines’ current account deficit settling at -4% of its GDP.

Latest BSP data showed that the country’s current account gap narrowed to $16.291 billion in 2025, or -3.3% of GDP, from the $18.565-billion deficit recorded in 2024.

If ING’s estimate holds true, the Philippines’ current account deficit will be wider than the central bank’s projected $15.3-billion gap or -3% of GDP for the year.