BANGKO Sentral ng Pilipinas (BSP) Governor Felipe Medalla issued a statement on Thursday, expressing readiness to deploy measures to protect the Philippine economy from the ill effects of the recent aggressive rate hike by United States Federal Reserve.
Medalla said the action of the US Fed, a 75-basis-point increase in interest rates, could continue to drive exchange rate moments in emerging market economies including the Philippines, especially amid tightening global financial conditions and broadening uncertainty over global growth prospects.
“In order to manage the spillover effects of such external developments, the BSP is prepared to utilize the full force of available measures in order to address the potential risks to Philippine inflation and inflation expectations arising from an overshooting or excessive depreciation of the Philippine peso,” Medalla said.
“At the same time, the BSP will continue to be guided by its assessment of the domestic and global developments that affect the outlook for inflation and growth,” he added.
Earlier this year, the BSP Monetary Board pulled off an off-cycle monetary policy rate hike of 75 basis points on the back of rising inflationary and currency pressures.
Medalla also said earlier this week that a rate hike to the tune of 25 to 50 basis points is expected in their upcoming August meeting.
“Looking ahead, the BSP stands ready to take all necessary monetary policy action to bring inflation back toward a target-consistent path over the medium term. Further monetary policy adjustment will be carried out in the coming months commensurate with the primary objective of preventing inflation from becoming further entrenched,” Medalla said.
“The BSP believes the Philippines’ robust economic prospects continue to provide enough room for further tightening of the monetary policy stance. As always, the BSP’s future monetary policy decisions will remain guided by data outcomes for the Philippine economy,” he added.
On Thursday, the local currency closed at P55.82 to a dollar, depreciating from the P55.68 to a dollar close in the previous trading day, data from the Bankers Association of the Philippines (BAP) showed.