THE Bangko Sentral ng Pilipinas (BSP) may let the peso fall for a few more week to prop up local inflation numbers, a regional banking giant said.
In a recent research note, the DBS Bank said the central bank is looking to be “more tolerant of a weaker peso,” with the belief that the local currency played a part in the fall of inflation in recent months.
“One possible reason for the sustained fall in inflation numbers is currency strength. Since end-2013, the peso is the best-performing Asian currency against the US dollars, and this has kept imported inflation low. Strong foreign-remittance flows have been supporting the peso amid the recent bouts of financial-market volatilities,” the DBS Bank said.
Latest data from the central bank showed that remittances sent by Filipino migrant workers hit $12.08 billion in the first half of the year.
The DBS Bank added that the falling inflation in the country is something that should not be ignored.
“It is not just about oil prices, though, as core inflation has also slipped below 2 percent, the first time since August 13. Yet, underlying demand stays fairly strong. Private consumption and investment have driven overall growth in recent years and not much has changed on this front,” the DBS Bank said.
Inflation has been continuously falling down since March this year, from 2.4 percent now down to 08 percent in July—latest data showed. The average inflation in the first seven months of the year is at 1.9 percent—a tad bit lower than the government’s target range of 2-percent to 4-percent annual inflation for 2015.
Despite the projection of a below target inflation in this year, the DBS Bank still sees the central bank holding its rates to current levels.
“With GDP [gross domestic product] growth still looking fairly strong, the BSP is not under any kind of pressure to tweak its policy right now,” the DBS Bank said.
The local currency hit 46.5 to a dollar on Thursday, the last trading day of the week. The volume of trade hit $699.7 during the day.