MANILA, Philippines - Lower oil prices may prompt the Bangko Sentral ng Pilipinas (BSP) to downgrade its forecast for this year's inflation rate to 4% from 4.7%.

At the sidelines of the Philippine Economic Briefing on Wednesday, BSP Deputy Governor Diwa Guinigundo said inflation probably moderated to between 3.4% and 3.5% in February from 4.3% in January mainly due to lower oil prices.

"Given the lower-than-expected January inflation rate, as well as the moderation in oil prices in January and February, we expect inflation for the whole year of 2010 at about 4% compared to our present scenario of 4.7%," Guinigundo said.

Guinigundo said the official inflation forecast would be revised "depending on the kind of information we get until the Monetary Board meets."

He noted, meanwhile, that the ongoing dry spell ravaging crops may impact average inflation this year, but it was too early to say if policy rates would be tightened as a result.

Currently, BSP is targeting 3.5% to 5.5% inflation this year, and 3% to 5% next year.

It said it was looking closely at inflation and financial market conditions as it charts the next steps in its planned reversal of loose monetary policy.

At its last policy-setting meeting, it kept the benchmark overnight borrowing rate at a record low of 4%, but hiked the rate at which it lends money to banks by 50 basis points to 4%.