PESO exchange rates will continue to be affected by outside developments, the Bangko Sentral ng Pilipinas (BSP) warned on Thursday following another massive US Fed rate hike.
Bangko Sentral ng Pilipinas Governor Felipe Medalla. CONTRIBUTED PHOTO
“The action of the US Federal Reserve (Fed), along with the tightening of global financial conditions and broadening uncertainty over global growth prospects, could continue to drive exchange rate movements in emerging market economies, including in the Philippines,” BSP Governor Felipe Medalla said in a statement.
The US central bank raised its benchmark rate by another 75 basis points (bps) on Wednesday to combat persistent inflation. It was the first time in the Fed’s modern history that interest rates had been hiked by 75 bps twice in a row.
The peso lost 14 centavos on Thursday, closing at P55.82 versus the United States dollar. It saw its worst day in nearly 18 years last July 12 when it hit P56.37:$1.
Medalla said the BSP was ready to use the full force of all available tools to address potential risks from external developments.
“At the same time, the BSP will continue to be guided by its assessment of the domestic and global developments that affect the outlook for inflation and growth,” he added.
Inflation spiked to 6.1 percent in June. The BSP’s policymaking Monetary Board now expects it to average 5 percent, up from 4.6 percent previously and exceeding the 2- to 4-percent target.
Rising inflation prompted the BSP to announce an off-cycle 17-bps rate hike last July 15 following two consecutive 25-bps rate hikes in May and June. The BSP’s overnight borrowing, deposit and lending rates of the central bank currently stand at 3.25 percent, 2.75 percent and 3.75 percent, respectively.
Medalla said additional monetary policy adjustments would be made in the coming months, with the main goal of stopping inflation from becoming more entrenched.
“The BSP believes the Philippines’ robust economic prospects continue to provide enough room for further tightening of the monetary policy stance. As always, the BSP’s future monetary policy decisions will remain guided by data outcomes for the Philippine economy,” he added.