Remolona: Peso slump to 60:$1 still possible
A peso fall to the 60-level against the US dollar remains “a possibility” despite the Bangko Sentral ng Pilipinas’ (BSP) decision to hold rates steady, Governor Eli Remolona Jr. said, adding that hitting the pause button on easing was the “less disruptive” action for the market.
But Remolona, in a recent interview with One News TV, reiterated the central bank’s position to not worry too much about the local currency unless it sharply depreciates, which can stoke inflation by pushing up import costs.
“It (60:$1) is a possibility,” Remolona said.
“As you know, some of our imports are invoiced in dollars. So, because of that, if the swings are large enough, then we can get inflationary effects. Then we’d like to dampen those swings,” he added.
Markets typically don’t like surprises but the peso capped the week appreciating back to the 57-level on Friday, a day after the central bank decided to keep the benchmark rate untouched at 5.75 percent. The move defied market consensus, with only one of the 16 economists polled by the Inquirer last week accurately predicting the pause.
The latest decision left the key rate at a level that’s still among the highest in Asia despite the cumulative cuts worth 75 basis points (bps) last year, which may stem capital outflows that can weaken the peso.
‘It wasn’t easy’
Remolona said deferring another rate cut—which he called a “complicated decision”—was less disruptive to the markets.
The BSP boss explained that the pause would help the central bank better assess the impact of back-to-back tariff actions in the United States on inflation and the domestic economy.
“We decided that it was better to pause now and then ease later than ease now and then have to reverse ourselves later,” he said.
For many market observers who had projected a rate cut, a benign inflation that steadied at 2.9 percent in January had given the BSP enough space to focus on supporting economic growth, which had fallen short of both consensus and the Marcos administration’s target last year.
