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October 06, 2022

Authorities closely watching inflation pressures from Russia-Ukraine war

Monetary authorities continue to closely monitor the Russia-Ukraine conflict and remain vigilant against its impact on the Philippines’ inflation outlook.

“While spillovers from the Ukraine-Russia conflict will likely be limited given our lack of close economic linkage with the two countries, its impact through the commodities channel could pose upside risks to domestic inflation,” BSP Governor Benjamin Diokno said.

To mitigate the impact of the ongoing conflict, the BSP supports the timely implementation of direct non-monetary measures by the national government.

These fiscal policy measures include the recommendations of the Economic Development Cluster (EDC) to shift to Alert Level 1 to increase domestic economic activity; increase the fuel subsidy program; reduce tariff rates for rice, corn, swine, and coal until end of the year; and provide targeted fertilizer vouchers to farmers, among others.

The BSP also supports the call for policymakers to provide adequate support to the most vulnerable sectors of the economy to help offset rising living costs.

The central bank carefully monitors the developments and pass-through of rising international prices to domestic inflation and possible second-round effects from supply-side pressures or any shift in the public’s inflation expectations.

“In its monetary policy meeting on May 19, the Monetary Board will review its assessment of the inflation outlook and macroeconomic prospects given recent domestic and global developments,” Diokno added.

The BSP continues to wield a wide arsenal of policy instruments to respond to any adverse impact of the conflict and stands ready to act.

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