BSP allays fears on peso depreciation to near 11-year low

The Bangko Sentral ng Pilipinas (BSP) on Wednesday allayed fears on the depreciation of peso to a near 11-year low, saying it has a “limited impact” over the medium-term.

During the briefing of the Development Budget Coordinating Committee (DBCC) on the 2018 budget, BSP Governor Nestor Espenilla, Jr. told the Senate finance committee that “the peso is expected to remain broadly stable over the medium-term.”

“It is also worth noting that the recent decline in the peso should have minimal effects on the country’s macroeconomic conditions over the medium-term,” Espenilla said. 

“For instance, it takes a permanent one peso per dollar depreciation to raise inflation by about 0.15 to 0.2 percentage point over a two-year period. This limited impact gives the BSP the flexibility to take a longer view on the peso,” he said.

The Philippine peso slipped further and closer to an 11-year low against the dollar on Tuesday as the probability of another interest rate hike in the US this year bolstered the greenback.

The local currency shed 26 centavos to close at P51.340:$1 from 51.080 on Friday. This is the weakest for the peso since August 25, 2006, when the pair finished at 51.38:$1.

Malacañang meanwhile was unfazed, saying it trusts Espenilla on the “prudent management of our currency.” —KG, GMA News