Philippine Peso Hits 17-Month Low Amid Global Economic Signals

The Philippine peso continued its downward trajectory, marking its sixth consecutive trading day of decline. On Thursday, the currency hit a near 17-month low, closing at P57.19 to the dollar, slightly weaker than Wednesday’s close of P57.18. This level of depreciation brings the peso to its lowest since November 22, 2022, when it closed at P57.375 to the dollar.

The peso’s recent slide is attributed to a mix of international and domestic factors, including statements from the Federal Reserve and the Bangko Sentral ng Pilipinas (BSP). Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), pointed to the “latest cautious signals from Fed officials on possible Fed rate cuts” as a key driver of the weakening peso. This includes remarks by Federal Reserve Chair Jerome Powell hinting at potential delays in policy rate cuts due to persistent inflation in the United States.

Domestically, BSP Governor Eli Remolona Jr. indicated that the Philippines might consider cutting policy rates by the fourth quarter of 2024 or as late as the first quarter of 2025 if inflation remains high. “We’re still in the second quarter, so we have plenty of time. I would say the central scenario would be a fourth-quarter ease. If things are worse, then I think that might be postponed to the first quarter of 2025,” Remolona commented.

Despite the peso’s depreciation, Governor Remolona maintains that the central bank is comfortable with the currency’s movement, attributing it to adjustments to recent events and the overall strength of the US dollar.

At its last policy meeting on April 8, the Monetary Board opted to maintain the status quo with the benchmark rates unchanged: the target reverse repurchase (RRP) rate at 6.5%, the overnight deposit rate at 6.0%, and the overnight lending facility rate at 7.0%. These rates are at their highest in nearly 17 years, having last been at 7.5% in May 2007.

As the global economic landscape continues to influence local monetary policies, stakeholders are closely monitoring these developments to gauge their potential impact on the Philippine economy.