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BLOOMBERG
The Philippine central bank is closely monitoring the peso “for possible spillover impact on inflation amid the global banking stresses†after the currency slid to more than four-month lows this week.
Still, the Bangko Sentral ng Pilipinas (BSP) believes that “a freely moving exchange rate is an essential price signal†that allows the economy to respond to global developments, Deputy Governor Chuchi Fonacier told an annual assembly of currency traders.
The peso breached the 56 level against the dollar amid an outflow of foreign funds from Philippine equities and signals that the BSP could pause from raising interest rates at its policy meeting next month if the downtrend in inflation continues. Before its recent slide, the peso was one of the best performing currencies in Asia.
Domestic inflation cooled to a six-month low of 7.6% in March, the second month in a row that price gains have slowed after hitting a 14-year high in January. BSP Governor Felipe Medalla said earlier this month that the strengthening currency was helping slow inflation.
The BSP has raised its key rate by 425 basis points since last May, one of the most aggressive tightening cycles in the region. Its latest quarter-percentage point hike in March brought the overnight reverse repurchase to 6.25%, the highest since 2007. The central bank’s policymaking monetary board meets next on May 18.