By Lee C. Chipongian
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. expects the peso-US dollar rate, currently at the P52 level, will continue to be steady for some time, aided by easing US market rates.
“Broadly we can say that because of the impact of the lowering of the Fed (US Federal Reserve) funds rate target, then that is going to be a positive to our peso-US dollar rate,” said Dakila last Friday.
The inter-agency Development Budget Coordination Committee (DBCC) has an exchange rate range of P51 to P53 vis-à-vis the US dollar for 2019 as assumptions for budgeting purposes. The DBCC follows what the BSP recommends in terms of exchange rate assumptions, among other indicators.
“We see that the peso-US dollar rate will remain broadly stable over the near term with probably some support coming from the decisions of the Fed,” Dakila added.
He also noted that the stable exchange rate is one of the main factors that contributed to the benign inflation outlook and convinced the Monetary Board to reduce benchmark rates by another 25 basis points (bps) for a cumulative 50 bps cut so far this year.
Inflation further dropped to 2.4 percent in July from 2.7 percent in June due to the relaxation of constraints in food prices, mainly because of the impact of rice tariffication. “In the next few months, we can expect further deceleration of inflation in key commodity items,” said Dakila.
The peso was stronger in July, averaging about P51.14 based on central bank data. On August 1 it touched a low of P50.86:$1 and hit a high of P52 on the day the Monetary Board cut rates by 25 bps last week.
Dakila said at P52:$1, the peso is still trading “well within the forecast assumption that was announced by the DBCC.”