The monetary authorities said the ill effects of elevated oil prices felt by a broad swathe of Filipinos is best addressed not by the Bangko Sentral ng Pilipinas (BSP) but by the national government.
BSP Governor Benjamin E. Diokno and members of the Monetary Board (MB) not only signaled this by keeping the policy rates steady on Thursday but said the short-term remedy may be found in the fiscal sector rather than the monetary.
“It is still best to address the inflationary pressures through direct non-monetary intervention,” Diokno said.
Crude oil selling for $115.16 per barrel in the world market at the moment have caused the labor and transport sectors to demand adjustments in fares and wages as the price of commodities, particularly food, shoot up.
According to Diokno, the monetary authorities are keenly aware that inflation, averaging 3 percent in January and February, will likely remain elevated in the coming months due mainly to domestic and global supply-side pressures.
But he argued against interest rate adjustments at this point as such a decision is a blunt response that will hit everyone regardless of status in life. An interest rate increase to combat elevated prices will penalize households and businesses alike.
He also pointed out that BSP simulations show pre-pandemic economic growth is possible around the second half of the year.
Nevertheless, Diokno said the BSP is “prepared to act as necessary should we see stronger indications of second-round effects such as when there are already broad-based price pressures on inflation expectations become disanchored.
“And as always, our decisions on monetary policy stance going forward will continue to depend on the data.”