Peso is not weak – BSP

“It’s a strong dollar, not a weak peso,” Medalla who is a Monetary Board member since 2011, told Manila Bulletin. He takes over the Bangko Sentral ng Pilipinas as its sixth governor on July 1.

The peso slid to a 42-month low against the greenback on June 10, from P52.95 the day before. The last time the peso was at the P53-level was on Dec. 20, 2018 when the exchange rate was at P53.10. The peak in intraday level was Jan. 22, 2019 at P53.04. The peso has lost 3.94 percent or P2 vis-à-vis the US dollar from end-2021 close of P50.99.

To stabilize and temper a depreciating peso and contain rising inflation expectations, the Monetary Board has started its rate hike last May 19, wherein both Medalla and outgoing BSP Governor Benjamin E. Diokno signalled that two more 25 bps rate adjustments will be coming on June 23 and Aug. 18 policy meetings. This will bring the benchmark rate to 2.75 percent by August from 2.25 percent.

When asked if the DBCC will modify the high end of the exchange rate assumptions after the peso breached the P53 level last Friday, Medalla said this will be a premature move. The central bank’s projected exchange rate path, which is not disclosed to the public as it is an internal guidance, continued to reflect the depreciating peso and the US Fed’s faster-than-anticipated tightening of a cumulative of 250 basis points rate hikes this year and another 50 bps increase in 2023, according to the report.

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