MANILA, Philippines — The Department of Finance (DOF) has conducted a thorough review of about…
Government is adamant to keeping PHP below 60: DOF
Benjamin Diokno, the finance secretary, said interventions would keep the peso from exceeding the 60-level versus the US dollar but left the door open to it happening.
He said to reporters on the sidelines of a seminar in Taguig City on Monday, “It can exceed for a day but it will go back.”
The peso is currently trading at a level of 58 to the US dollar, but so far this month, it has repeatedly closed at a record low of 59.00 to the dollar.
According to Diokno, the peso will perform better as the year comes to a close thanks in part to the seasonal inflows of remittances from overseas Filipino workers (OFWs) and the revenues of the business process outsourcing (BPO) sector, despite the peso’s current performance, which is impacted by the strengthening of the dollar due to the Federal Reserve’s continued hikes in its key rates.
According to him, the peso is expected to regain its footing and stabilize around the 55 level thanks to underlying reasons including the influx of Filipino employees from abroad.
Diokno claimed last week that the Bangko Sentral ng Pilipinas (BSP) may use about USD10 billion of the nation’s foreign reserves to support the peso.
He claimed that after asking his team to estimate potential inflows from OFWs and the BPO sector toward the year’s conclusion, he arrived at the amount.
Although his stand is more detailed, he claimed that his position is the same as that of BSP Governor Felipe Medalla.
Additionally, he made it clear that any decision on this is subject to approval by the BSP’s Monetary Board (MB), a seven-member body that makes policy.
We always depend on statistics, he continued, “and what the situation is by the time we meet.”
He continues to predict that the key policy rates of the central bank would climb by an additional 100 basis points until the end of the year, which may be accomplished either by 75-25 basis points or by adding 50 basis points to each of the next two meetings of the MB where rates are decided.
The MB’s upcoming rate meetings are set for November 17 and December 15.
Diokno stated that the rate increases are intended to offset the effects of the Fed’s own rate rise choices, but he added that the MB will not raise rates to the same extent as the Fed.
He referred to the four-decade US inflation rate by saying, “They have bigger issues than us.” “Mas malaki problema nila kaysa sa atin.”
In September 2022, the US consumer price index (CPI) decreased from 8.3 percent the previous month to 8.2 percent.
This is quicker than the Philippines’ inflation rate of 6.9 percent during the same month, which itself was an increase over the previous month’s 6.3 percent rate of 6.3 percent.
Average inflation throughout the first nine months was 5.1 percent, exceeding the government’s goal range of 2-4 percent.
Inflation is expected to average 5.6 percent this year, 4.1 percent the following year, and 3 percent in 2024, according to monetary authorities.
During the same economic briefing, Medalla stated that the forecast for next year’s above-target inflation was due to forecasts that the rate of price increases would continue high until the first half of the following year.
With the caveat that “the key to success is to (have) some type of information asymmetry,” he asserted that the central bank still has “quite a bit of buffer” to address the depreciation of the local currency.
Although he noted that BSP key rate increases will not match those made by the Fed, he noted that if the local currency is already declining by about 15% in relation to the US dollar, “there is a threshold where it gets highly political.”
Therefore, he continued, “it’s wise to intervene before it becomes too political.”
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