The third day in a row that the peso hit record lows
(Eagle News) – The Philippine peso fell to a new record low of 58.49 pesos per US dollar on Thursday, September 22nd, the third day in a row that the peso fell to record lows.
On Wednesday, September 21, the peso fell to P58 against the dollar, and the day before, Tuesday (September 20), it closed at P57.48.
This came as the US Federal Reserve raised interest rates again to curb rising prices in the US.
The rate hike by the Federal Reserve led to sharp losses in Asia, Europe and Wall Street.
In Japan, the yen also fell to a 24-year low against the dollar on Thursday, with the dollar rising to nearly 146. This prompted the Japanese Ministry of Finance to intervene in the currency market to support the yen.
The British pound also briefly fell to a new 37-year low of $1.1212, even as the Bank of England prepared to announce a second consecutive interest rate hike later on Thursday, according to an AFP report.
The euro also fell to the dollar’s lowest level in 20 years.
– PHL monetary board raises interest rates –
In the Philippines, the Monetary Board decided to raise the interest rate on the Bangko Sentral ng Pilipinas reverse repo facility by 50 basis points to 4.25 percent, effective from tomorrow, September 23.
“The latest BSP baseline forecast shows that average inflation is still expected to breach the upper end of the 2-4% target range at 5.6% in 2022. The forecast for 2023 has also increased slightly to 4.1%. Meanwhile, it is down The outlook for 2024 is to 3 percent, BSP Bank said Thursday, September 22.
In deciding to raise the interest rate again, the Monetary Council noted that price pressures continue to expand.
“The rise in core inflation indicates emerging pressures from the demand side for inflation,” it said in a statement.
Moreover, the effects of the second round continue to be felt, with inflation expectations remaining elevated in September following the approved minimum wage and transportation fare increase. However, inflation expectations remain broadly entrenched over the medium term.
In the month of September alone, the peso hit new lows eight times.
On September 2, the peso fell to 56.77 pesos per US dollar. On September 5, it fell further to 56.99 pesos. The next day, September 6, the peso fell to P57: $1. Two days later, on September 8, the peso fell to P57.18 per dollar. On September 16, it fell further to P57.43, and on September 20, it fell further to P57.48.
There may be more rate hikes by the US Federal Reserve to protect the US dollar.
– Expect the US Federal Reserve to continue raising interest rates –
US Federal Reserve Chairman Jerome Powell has warned that the process of overcoming the highest rate of inflation in 40 years will involve some pain.
This was the third consecutive increase of 0.75 percentage point by the Federal Open Market Committee (FOMC) that set policy for the Fed, and continued the strong measure of five hikes this year.
The increase takes the policy rate to 3.0-3.25 per cent, and the FOMC said it expects “continued increases … will be appropriate”.
We have to keep inflation behind us. I wish there was a painless way to do this. Powell said.
The Fed signaled more significant increases in US interest rates.
High prices are putting pressure on American families and businesses, and have become a political burden on President Joe Biden as he faces midterm congressional elections in early November.
But the contraction of the world’s largest economy would be an even more damaging blow to Biden and the world at large.
Powell made clear that officials will continue to work aggressively to calm the economy and avoid a repeat of the 1970s and early 1980s, the last time inflation in the United States got out of control.
It took tough — and sluggish — to finally bring down rates in the 1980s, and the Fed is unwilling to give up its hard-earned credibility in fighting inflation.
The Federal Reserve’s quarterly forecast released with its interest rate decision on Wednesday shows that members of the Federal Open Market Committee expect US GDP growth to be roughly flat this year, rising just 0.2 percent. But they see a return to expansion in 2023, with annual growth of 1.2 percent.
They expect more price increases this year – a total of 1.25 percentage points – and more in 2023, with no cuts until 2024.
Inflation is a global phenomenon amid the Russian war in Ukraine at the top of the global supply chain and the Covid lockdown in China, and other major central banks are taking action as well.
(Reported by Agence France-Presse)