The PESO moved sideways against the dollar on Thursday after the central bank aggressively hiked interest rates to curb rising inflation. — SW FILE PHOTO
The PESO moved sideways against the dollar on Thursday as the Bangko Sentral ng Pilipinas (BSP) delivered a widely expected 75 basis point (bp) rate hike to fight inflation.
The local unit closed Thursday at 57.36 pesos per dollar, down a centavo from its close of 57.35 pesos on Wednesday, based on data from the Bankers Association of the Philippines.
The peso opened Thursday’s session weaker at P57.45 per dollar. Its worst finish was P57.53, while its intraday best was P57.35 against the greenback.
Dollars exchanged on Thursday fell to $661.88 million from $1.02 billion on Wednesday.
The peso was little changed Thursday after the BSP policy decision, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
The central bank raised interest rates for the sixth time this year on Thursday in a bid to curb rising inflation.
As expected, the Monetary Board increased the overnight reverse repurchase or policy rate by 75 basis points to 5%. The overnight and credit facility rates were also raised to 4.5% and 5.5% respectively.
The central bank has now raised interest rates by a total of 300 basis points since March.
Mr Ricafort said the peso has slowly declined as the central bank issued higher inflation forecasts for this year and next amid strong upside risks to prices.
BSP on Thursday upgraded its inflation outlook for 2022 to 5.8% from the previous 5.4%, above its 2-4% target range. The central bank also raised the forecast for 2023 to 4.3% from 4.1% and the forecast for 2024 to 3.1% from the previous 3%.
“The peso weakened slightly after the GNP governor [Felipe M.] Medalla hinted at potentially softer rate hikes in future sessions,” one trader said in an email.
Asked whether BSP will continue to keep pace with Fed tightening in the coming months, Mr Medalla said in a briefing that its future policy actions will be data dependent.
“The Fed rate isn’t the highest now, but the four 75-bp (rate hikes) have been the (fastest) for a long time and I think that’s over. As such, we are slowly returning to a more normal global rate environment,” he said.
“We will likely do less of the BSP’s two recent unusual actions, namely the off-cycle 75 (bps) and this 75 (bp), which were announced two weeks earlier,” added Mr. Medalla.
Still, the peso held steady after S&P Global Ratings affirmed the Philippines’ credit rating, Mr. Ricafort noted.
S&P maintained its BBB+ rating for the Philippines and issued a “stable” outlook for expectation of “healthy” growth.
For Friday, the trader said the peso could rise on a potentially strong euro-zone inflation report.
The trader sees the peso range between P57.20 and P57.45 on Friday while Mr. Ricafort gave a slightly wider forecast range of P57.30 to P57.50 per dollar. — KB Ta-asan