Officials must support PH peso – economic

An economist said local authorities have “already indicated” that they do not want the Philippine peso to weaken further against the US dollar.

This comes after the local currency fell to P57.18 against the US dollar in the Philippine trading system last week.

Michael Rycafort, chief economist at Rizal Commercial Banking Corp., told The Manila Times that financial authorities may need to use all available measures or tools to support or stabilize the peso exchange rate and inflation.

“The local authorities have already indicated that they do not want further weakness in the peso exchange rate as this could lead to higher inflation, given their mandate for price stability under inflation targeting for the past 20 years,” he said.

Rycafort added that the monetary authorities also have a good track record of stabilizing the peso.

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“They have a good track record of stabilizing the peso exchange rate, especially from 2004-05 or for two years, limited at the 56.40 record levels at that time, and the 56.40 record was respected over the next 18 years (until September). 5, 2022 ), reflecting the resilience of the peso for many years,” said Rycafort.

However, Central Bank of the Philippines Governor Philip Medala said earlier this month that the monetary authorities had taken sufficient steps to stabilize the peso’s exchange rate.

“We can say we’ve done enough. This isn’t a peso problem, it’s a dollar problem,” Medala said during the Reuters NEXT Newsmaker’s virtual event.

The BSP has raised its inflation forecast for this year from 5 percent to 5.4 percent based on its assessment on August 18.

However, it lowered its forecasts for 2023 and 2024 to 4 percent from 4.2 percent to 3.2 percent, respectively.

Medela said inflation could remain high and above target for the first half of next year before settling in the middle of the 2-4 percent target by the second half.

In particular, Medala, who chairs the seven-member monetary board, said the expected rate hike by the US Federal Reserve (Fed) to combat inflation is being closely watched.

The next scheduled meeting of the BSP Monetary Board to set the interest rate is scheduled for September 22. He said the upcoming rate hike by the US Federal Reserve would be a “key factor”.

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