The Bangko Sentral ng Pilipinas (BSP) stands ready to pivot back toward the tightening bias as persistent supply shocks and the rally in global oil prices threaten to derail the central bank’s inflation targets.

BSP Deputy Governor Zeno Ronald R. Abenoja said that the Monetary Board is closely monitoring geopolitical tensions that have driven up import costs and weakened the domestic currency.

“If we see further disruptions in supply chains, further deterioration, or further increases in prices, then that may prompt the Monetary Board (MB) to consider policy action moving forward,” Abenoja told the private sector on Tuesday, March 17.

He admitted that this particular external risk could impact the BSP’s assessment of its ability to stabilize the overall economy. Its mandate is to keep a lid on consumer prices, especially in times when domestic and external environments are stirring risks.

According to the deputy governor, nearly all of the peso’s earlier gains were reversed over the past two weeks, particularly from the last week of February through the first weeks of March. He also noted a sudden uptick in interest rates on government securities over the same period.

Abenoja, who oversees the BSP’s monetary and economics sector (MES), said the central bank is assessing the signs and scale of further supply disruptions. Findings from the central bank’s close monitoring will determine its future decisions.

“What we are looking at is whether there are signs of further disruptions, and how persistent their impact will be, as this will determine how monetary policy responds in the next few quarters,” Abenoja said.

Prior to the supply shocks, the BSP had signaled it was nearing the end of its monetary policy easing cycle, which began two years ago in August 2024. Key borrowing costs have so far been reduced by a cumulative 225 basis points (bps) to 4.25 percent.

Apart from price pressures, Abenoja said the BSP will also be looking at possible wage adjustments over the next few months.

“Another aspect of our response is to ensure that the hard-earned stability in financial markets and the financial system is preserved. This would require us to provide liquidity when and where it is needed,” Abenoja said.

“So we continue to remain alert to any disruptions in financial markets and the banking system, and we stand ready to provide support if necessary,” he added.

Moody’s Ratings said in a March 17 virtual briefing that inflation risks are tilted to the upside, which could push inflation assumptions higher.

Moody’s said that in an “adverse” scenario, local inflation could stay above four percent, exceeding the BSP’s upper target range. “That again complicates some of the BSP’s policy path,” it added.