PHP: BSP may consider rate increases in response to Oil price surge – MUFG

Philippine Officials Respond to Oil Price Risks and Iran Conflict

Michael Wan, Senior Currency Analyst at MUFG, noted that Philippine policymakers have indicated the possibility of raising interest rates if rising oil prices and disruptions caused by the Iran conflict continue. Finance Secretary Frederick Go believes that a brief conflict would have minimal impact on GDP, but warns that a prolonged war—lasting over six months—could lead to more significant economic consequences. He also downplays concerns about the gradual weakening of the Philippine peso against the US dollar.

Central Bank Closely Monitoring Oil Prices and Economic Growth

The Bangko Sentral ng Pilipinas (BSP) and Finance Secretary Go have both stated that interest rate hikes are under consideration should oil prices remain elevated and disruptions persist. The BSP is carefully assessing the extent and duration of these challenges stemming from the Iran conflict.

Secretary Go explained that if the Iran war is resolved quickly, its effect on Philippine GDP growth would likely be less than 10 basis points. However, he cautioned that a conflict lasting more than six months could have a much greater impact.

He further emphasized that as long as currency fluctuations are gradual and not sudden, he is not overly concerned about the peso's depreciation against the dollar. Additionally, he has requested government agencies to postpone non-essential capital expenditures.