Marcos ready to defend peso, fight inflation

October 18, 2022 - 5:39 PM
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In this Oct. 14, 2022 photo, President Ferdinand Marcos Jr attends the 8th Annual Balik Scientist Program (BSP) Convention. (OPS/Released)
  • Marcos says ready to defend the Philippine peso
  • Marcos says to use interest rates to tame prices
  • Philippine peso worst performer in Southeast Asia

Philippine President Ferdinand Marcos Jr said on Tuesday his government was prepared to defend the peso, given that continued weakness in the currency could accelerate inflation that is already at four-year highs.

“We may have to defend the peso in the coming months, but the overall forecast is that we are still doing better than other countries in terms of inflation,” Marcos said on Twitter after meeting with his economic ministers.

Marcos said the government will continue to use interest rates to combat inflation, which is on track to breach a 2%-4% target for the year due in part to higher prices of imported commodities like fuel. Year-to-date inflation was at 5.1% in September, while year-on-year inflation stood at 6.9%.

“Number one priority is still inflation. We will continue to use interest rates to mitigate the effects,” he said.

The central bank has so far raised key policy rates PHCBIR=ECI by 225 basis points (bps) this year, including an off-cycle 75 bps hike in July, to tame inflation and slow the peso’s decline. Bangko Sentral ng Pilipinas has two more meetings left before the end of the year.

Central Bank Governor Felipe Medalla has said the monetary authority was active in the forex market and selling strategically to prevent “excessive” forex movements.

The peso, like other emerging market currencies, has hit multi-year lows this year as aggressive monetary tightening by the U.S. Federal Reserve strengthened the greenback by boosting its safe-haven appeal. The peso, the worst-performing Southeast Asian currency,has lost 13.5% against the U.S. dollar year-to-date.

Marcos’ statement was consistent with recent signals from the central bank about a possible large hike in policy rates and increased intervention in the foreign exchange market, said Michael Ricafort, an economist at Rizal Commercial Banking Corp. in Manila.

“These measures help stabilize both the peso exchange rate and overall inflation, as well as inflation expectations,” Ricafort said.

—Reporting by Enrico dela Cruz, Karen Lema and Neil Jerome Morales; Editing by Martin Petty and Kanupriya Kapoor