By Katherine K. Chan, Reporter
The Bangko Sentral ng Pilipinas (BSP) sees only a “small chance” of more aggressive monetary policy tightening this year, despite renewed volatility and expectations of a second-half economic recovery.
BSP Governor Eli M. Remolona, Jr. said they could be more aggressive in raising the key policy rate, potentially with a larger 50-basis-point (bp) move, amid fresh and emerging threats to inflation.
“May chance naman pero baka maliit na chance (There’s a chance but it could be small),” Mr. Remolona told reporters on the sidelines of a BSP event on Tuesday.
The central bank governor noted that the new tax reforms pushed by President Ferdinand R. Marcos, Jr. during his State of the Nation Address (SONA) on Monday may have an impact on the country’s inflation.
“We’re still estimating it,” he said in Filipino. “But there is (an impact). The major impact will be in 2027, with a smaller one in 2028.”
Mr. Marcos called on the Congress to pass several tax measures, including raising the threshold for income tax exemptions for low- and middle-income earners and tax breaks for micro, small, and medium enterprises.
PESO
Meanwhile, Mr. Remolona also noted that the peso’s recent slump to a new-record low could stoke inflation as it pushes import costs higher.
Soaring oil prices amid renewed conflict in the Middle East dragged the peso to a fresh low of P61.847 against the greenback on Friday, down 9.7 centavos to break its previous record-low of P61.75 on Thursday.
However, Mr. Remolona said the latest record low peso-dollar exchange rate is a “misleading number” as other currencies also suffered from the greenback’s strength last week.
“But that’s a misleading number because exchange rates were moving, right? You’re looking only at peso-dollar, right?” he said. “But the rest of the world has been, their currencies have been weakening against the US dollar.”
Still, Mr. Remolona noted that the BSP intervened very minimally in the foreign exchange market.
“When it’s a strong dollar, we limit intervention to just maintain orderly markets. Because if we intervene against a strong dollar, we’re just helping the rest of the world get their dollars,” Mr. Remolona said.
“Binibigyan natin sila ng dollars. So wala tayong laban sa ganon. Uubusin lang natin yung dollars natin. (We give them dollars. So we can’t compete with that. We will just use up our dollars),” he added.
The market sees the local unit testing new lows this week as rising oil costs fuel inflation concerns.
The BSP chief’s policy outlook also came as he reaffirmed their projection that the economy would rebound by the latter half of the year despite fresh inflationary threats.
