In recent weeks, there is heightened uncertainty due to soaring world crude oil prices. Based on the BSP’s oil price simulation, however, inflation could settle above the target range of 2.0 to 4.0 percent, only if crude oil prices average higher than $ per barrel in 2022 and 2023 on a sustained basis. Below $ per barrel, inflation would settle within the target range.
Should oil prices reach $ per barrel this year, inflation would be 0.7 –1.0 percentage point above baseline in 2022. In brief, inflation would average between 4.4 – 4.7 percent under the $ per barrel scenario.