’Oil at $100 may force BSP to hike interest rates ’

Upgrade to High-Speed Internet for only ₱1499/month!

Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.

Visit Suniway.ph to learn

March 7, 2026 | 12:00am

MANILA, Philippines — The Bangko Sentral ng Pilipinas may be forced to raise interest rates if global oil prices surge to around $100 per barrel, as higher energy costs could push inflation beyond the BSP’s target range.

BSP Governor Eli Remolona Jr. said the recent escalation of tensions in the Middle East has introduced new risks to the inflation outlook, which could compel the central bank to respond.

“It’s possible that at $100 a barrel, we will begin to breach what we call our tolerance range (of inflation at four percent),” Remolona said in an interview with Bloomberg TV.

The BSP chief said the $100-per-barrel level represents a threshold where higher oil prices could start feeding into the cost of other commodities, amplifying inflationary pressures.

This will likely require policy action if inflation rises beyond the central bank’s two to four percent target band.

Remolona acknowledged that the central bank could face difficult policy choices if the surge in oil prices persists.

“We might have to tighten,” he said, referring to a scenario wherein crude prices rise sharply and remain elevated.

Higher oil prices pose a particular risk for the Philippines, a net oil importer, as energy costs tend to cascade into transport, electricity and food prices.

Remolona also noted that oil prices have risen about eight percent since the start of the conflict in the Middle East, while the dollar has strengthened by roughly two percent. Combined, this means the price of oil in peso terms is about 10 percent higher.

“In peso terms, the price of oil is 10 percent higher than before. Ten percent is still very manageable,” Remolona said.

Oil prices have climbed in recent days as tensions in the Middle East rattled global energy markets. As of Friday, Dubai crude, the Philippines’ pricing benchmark for imported oil, was trading at around $79.06 per barrel, while Brent crude, the global benchmark, stood at about $85.44 per barrel.

The BSP cut its policy rate in February to help support the economy, bringing total rate cuts to 225 basis points since August 2024.

However, Remolona said the central bank now has limited room to provide further stimulus.

“There’s much less room now, so we’re hoping we don’t have to tighten in the face of higher inflation,” he said.

For now, the central bank expects to keep its current policy stance if the identified risks do not materialize. “Our projections are to stay where we are. If the risks don’t materialize, then we’re in a place where we want to be,” he said.

In a separate interview with CNBC, Remolona likewise noted that the central bank could consider tightening monetary policy if oil prices climb sharply and remain elevated.

“At some point, if the price of oil goes to $100 a barrel, and the dollar continues to strengthen, then we’d have to consider a rate hike,” he said, warning that a stronger dollar combined with a sustained increase in oil prices could amplify inflation risks.

However, the BSP does not currently see the need for a rate hike as long as oil prices and the dollar remain within present levels.

“For now, where the price of oil is and where the dollar is, we don’t see the need for a rate hike,” he said. “So, for now, we’re where we want to be in terms of monetary policy.”

Despite the external risks, the BSP chief said the Philippine financial system remains resilient.

“Our banking system remains very strong,” Remolona said. “We have a lot of liquidity. We have very strong capital buffers.”