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The BSP is keeping an eye on the second-round consequences of higher global oil prices.

Despite the fact that global oil prices have fallen from over US80 per barrel in October, the Bangko Sentral ng Pilipinas (BSP) is nonetheless on the lookout for possible second-round repercussions.

BSP Governor Benjamin Diokno said in a video briefing on Friday that excitement about the efficiency of the coronavirus disease 2019 (Covid-19) vaccinations raised oil prices last year until the middle of this year, owing to increasing global oil demand.

According to Diokno, Dubai crude oil prices peaked at USD81.3 per barrel in October 2021, but have since fallen to around USD72.6 per barrel in the first two weeks of this month, owing in part to the emergence of the Omicron Covid-19 variant and decisions by the US, UK, and some Asian countries to release reserves to address supply constraints.

Higher global oil costs, he claimed, have influenced domestic inflation rates through a variety of products, including petroleum, electricity, gas, and other fuel.

While headline inflation continues above the government’s target range of 2% to 4%, Diokno claims that core inflation, which includes volatile items like food and oil, is still within target.

“This shows that demand-side factors are not the primary driver of inflation,” he said.

According to the Philippine Statistics Authority, average inflation was 4.5 percent in the first 11 months of this year, while core inflation was 3.3 percent.

The BSP’s average inflation predictions for this and next year were raised to 4.4 percent and 3.4 percent, respectively, by the central bank’s policy-making Monetary Board on Thursday.

For 2021 and 2022, these were previously set at 4.3 percent and 3.3 percent, respectively.

According to Diokno, changes in global oil prices have been factored into the most recent inflation estimates.

“However, the BSP is still on the lookout for any second-round consequences.” “One of the positive risks to the inflation outlook in the short term is the probable impact of the petition for jeepney fee hikes due to rising oil prices,” he said.

While the proposed six-month suspension of the petroleum excise tax may help to reduce inflation momentarily, Diokno believes the “effect would likely be reversed once the excise tax rates restore to (the) former level.”

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