MANILA – The Philippine peso could see further weakness if inflation continues to accelerate beyond the government’s target, according to the National Economic and Development Authority (NEDA).
With rising interest rates overseas and the continued acceleration of Philippine inflation, the peso could trade softer still, Socioeconomic Planning Secretary and NEDA Secretary General Ernesto Pernia told reporters last week.
“Problemakasi is the US is still scheduled to raise – what they call normalization – raise interest rates. So if you don’t respond to that then the peso depreciates,” he said.
Inflation is one of the key factors considered by policy-setting bodies across the globe in deciding to adjust key rates.
Last week, the central bank raised its inflation forecast this year to 4.6 percent from 3.9 percent.
The Philippine peso retreated by 39 centavos to P52.19:$1 on Friday following the announcement.
“It can further weaken the peso and set off a price-wage spiral,” Cid Terosa, dean of the School of Economics at the University of Asia and the Pacific (UA&P), told GMA News Online on Monday.
On the other hand, the BangkoSentralngPilipinas (BSP) raised interest rates to offset inflationary pressures.
“Nag desisyon ang Bangko Sentral na itaas ang interest rate … upang saganon ay mapangalagaan natin ang pagtaas ng presyong bilihin dito sa Pilipinas,” BSP Deputy Governor DiwaGuinigundo told reporters separately.
Guinigundo noted, however, that the uptick in inflation is only temporary and the growth of consumer prices is expected to settle at 3.4 percent in 2019 – within the government target of 2 to 4 percent.
“Kapag nag taas ng interest rates and Bangko Sentral ay mahihinto na ‘yung mga speculation ng merkado, lalong lalo na ‘yung mga market analysts, na patuloy ang pag taas ng mga presyong bilihin sa ating bansa,” he said. (GMA News)
