MORE BSP RATE HIKES. An economist projects more aggressive rate increases from the Bangko Sentral ng Pilipinas (BSP) as the peso registered another record-low level against the US dollar. The local currency finished at 56.77 to a greenback last Friday, surpassing its previous record-low of 56.45 hit on September 27, 2004. (Photo courtesy of RCBC)
MANILA – Depreciation of the Philippine peso, which touched the 57-level mid-trade and closed at its lowest-ever against the United States dollar, is expected to make monetary authorities sustain their aggressive rate hikes.
The local currency again slipped against the greenback and finished Monday at 56.999, the new weakest level after finishing at 56.77 last Friday, which breached the previous record low of 56.45 registered on Sept. 27, 2004.
“Thus, the new record high of the US dollar/peso exchange rate could potentially lead to more aggressive local policy rate hike,” Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said in a reply to e-mailed questions from the Philippine News Agency.
The local unit continues to get a hit from the general strengthening of the greenback, supported by anticipations for continued monetary tightening in the US to help address the four-decade high inflation rate.
The Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) has increased the central bank’s key rates by a total of 175 basis points since last May as domestic inflation rate continues to accelerate.
To date, the BSP’s overnight reverse repurchase (RRP) rate is at 3.75 percent.
The rate of price increases further rose to 6.4 percent last July from the previous month’s 6.1 percent.
This brought the seven-month average to 4.7 percent, way above the government’s 2-4 percent target band.
The MB also hiked its average inflation forecast for this year to 5.4 percent from 5 percent previously.
Monetary authorities said the central bank continues to have leeway to increase its key policy rates because of the sustained recovery of the domestic economy.
Domestic growth, as measured by gross domestic product (GDP), slowed to 7.4 percent in the second quarter of this year from quarter-ago’s 8.2 percent.
Authorities said this remains a good turnout as the economy continues to post expansion amidst the challenging economic environment. (PNA)
