Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla has said that with the peso now stabilizing against the United States dollar, they will focus their attention in addressing the elevated inflation rate, which is expected to return to within-target levels by October 2023.
Addressing the recent Chamber of Thrift Banks (CTB) general membership meeting in Makati, Medalla said monetary authorities are not worried on the foreign exchange rate anymore.
There has been an impressiveย changeย inย the situation particularlyย last yearย when theย pesoย registered its record-high closing of 59.00 to a dollar on Octoberย 3, 10, 13 and 17, 2022.
During that time, the peso was depreciating against the greenback due partly to the rising interest rates both here and in the US, and the continued acceleration of domestic inflation rate, among others.
To date, theย peso trades around theย 54-level against the US dollar and ended the week at 54.35.
Medalla said that while the peso depreciation has dissipated, the BSP needs to remain vigilant given the volatilities in the exchange rate on account of the global economic developments.ย Heย noted thatย the peso is currently the most appreciated unit in the region.
โSo, thereโs a little more time to relax.ย Inย the exchange rate front, we can now be more focused because exchange rate is not a problemโฆ the interest rates can now be the instrument thatโs fully focused on inflation,โ he added, citing that robust foreign exchange inflows, such as foreign direct investments (FDIs), support the local currency.
In an interview after the event, Medalla said the weaker peso is among the shock absorbers of the elevated inflation rate since this situation makes imported goods more expensive,ย โthe best way to discourage consuming imported goods and substituting local goods for them,โ he said.
Medalla, however, explainedย this is not good all the time because it adds to the price pressures.ย โAs Iโve said thatโs why letting the peso adjust to reflect market fundamentals is a good idea, exceptย when theย exchange rateย adjustment ย is fast,ย asย this will be followed by more price changes,โ heย added.
PHOTO: FOCUS ON INFLATION. Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said Friday (March 24, 2023) the stabilization of the peso gives monetary authorities more time to focus on addressing the country’s elevated inflation rate. He forecasts the peso to returnย within the government’s 2-4 percent target band by October 2023.ย (Photo by Joann S. Villanueva)
