LIFTING THE PESO. Finance Secretary Benjamin Diokno, in a forum on Monday (Oct. 24, 2022), said government interventions will remain in place to prevent the peso from overshooting the 60-level against the US dollar, He, however, is open to the possibility of the local unit weakening to the 60-level but noted that it is also expected to regain its footing due in part to the seasonal increase in remittances from Filipino workers as well as revenues of the business process outsourcing sector in the last quarter of the year. (Photo by Joann Villanueva)
MANILA – Finance Secretary Benjamin Diokno is open to the possibility of the peso touching the 60-level against the US dollar but said interventions will continue to prevent the local unit from overshooting the said level.
“Pwede naman kasi mag-exceed ng one day tapos babalik naman sya (It can exceed for a day but it will go back),” he told journalists on the sidelines of a forum in Taguig City on Monday.
To date, the peso is trading at 58-level against the US dollar but it has closed to its record-low of 59.00 to a dollar several times so far this month.
Diokno believes that despite the current performance of the peso, which is affected by the strengthening of the greenback due to the continued hikes in the Federal Reserve’s key rates, it will improve as the year ends due in part to the seasonal inflows of remittances from overseas Filipino workers (OFWs) and the revenues of the business process outsourcing (BPO) sector.
He said the peso is seen to regain its footing to around 55-level because of the backing of fundamental factors such as the inflows from Filipino workers abroad.
Last week, Diokno said the Bangko Sentral ng Pilipinas (BSP) can utilize around USD10 billion of the country’s foreign reserves to help buoy the local currency.
He said he came out with the figure after asking his staff to compute the possible inflows from OFWs and the BPO sector toward the end of the year.
He said his position is the same as BSP Governor Felipe Medalla although his stand is more specific.
He also clarified that any decision on this depends on the decision of the seven-member policy-making Monetary Board (MB) of the BSP, which he is part of.
“And we are always data-dependent, (and) what’s the situation by the time we meet,” he said.
He continues to see additional 100 basis points increase in the central bank’s key policy rates until the rest of the year, which can be done either by 50 basis points each in the next two rate-setting meet of the MB or by 75-25 basis points.
The next rate meetings of the MB are scheduled on Nov. 17 and Dec. 15.
Diokno said the rate hikes are seen to counter the impact of the Fed’s own rate hike decisions but clarified that the MB will not match the level of a rate increase by the Fed.
“Mas malaki problema nila kaysa sa atin (They have bigger problems than us),” he said, referring to the four-decade inflation rate in the US.
The consumer price index (CPI) in the US decelerated to 8.2 percent in September 2022 from month-ago’s 8.3 percent.
However, this is faster than the 6.9 percent inflation rate in the Philippines during the same month, which, in turn, is an acceleration from the 6.3 percent in the previous month.
Average inflation in the first nine months stood at 5.1 percent, higher than the government’s 2-4 percent target band.
Monetary authorities forecast inflation to average 5.6 percent this year, 4.1 percent next year, and 3 percent in 2024.
Medalla, during the same economic briefing, said the above-target inflation forecast for next year was due to expectations that rate of price increases will remain elevated until the first half of next year.
He said the central bank continues to have “quite a bit of buffers” to address the weakening of the local currency but declined to elaborate, noting that “the key to success is to (have) some form of information asymmetry.”
He said hikes in the BSP key rates will not match that of the Fed’s but pointed out that if the local currency is already depreciating by around 15 percent against the greenback “then there’s a threshold where it becomes very political.”
“So it’s good to act before it becomes too political,” he added. (PNA)
