PESO WEAKENS ANEW AFTER HIGHER U.S. INFLATION

THE Philippine peso again weakened against the US dollar following the release of the higher-thanexpected US inflation data on Wednesday.

The peso returned to the P55 level a month after it strengthened to the P54 level. Data from the Bankers Association of the Philippines (BAP) showed the peso closed at P55.17 to the greenback.

The peso opened at P54.95 to the dollar. It was at its strongest at P54.95 to the greenback and was at its weakest at P55.23 on Wednesday’s trading.

“We think its more about the higher-than-expected US inflation print last night. The surprise print meant the US Central Bank isn’t about to end its rate hikes, quite the opposite of what our foreign exchange market traders have been anticipating since late 2022,” BPI Chief Economist Emilio S. Neri Jr. told Businessmirror.

Reports stated that inflation in the United States rose 6.4 percent in January 2023 while month-on-month inflation increased 0.5 percent.

The US Federal Reserve earlier aimed to raise interest rates to combat inflation and bring it down to 2 percent. The Federal Open Market Committee (FOMC) recently raised US interest rates by 50 basis points.

In the Philippines, Managing Director of emanagement for Business and Marketing Services, Jonathan Ravelas told this newspaper that the market seems to be expecting a 25 bps hike by Bangko Sentral ng Pilipinas(bsp) this Thursday (February 16).

“[This is] despite recent developments in domestic inflation and the Federal Reserve officials saying interest rates may need to move to a higher level than anticipated to ensure inflation continues to fall, after fresh data showed prices rose at a brisk pace last month,” Ravelas said.

The Monetary Board will conduct its first policy rate meeting for the year on Thursday. BSP Governor Felipe M. Medalla earlier said that jumbo rate hikes or 75 basis point increases were already off the table for 2023.

In January 2023, the Philippine Statistics Authority (PSA) reported that inflation averaged 8.7 percent. The BSP’S target is to bring down inflation to 2 to 4 percent by next year.