FILIPINOS may get some reprieve from the high cost of imports as the peso strengthened against the United States dollar on Thursday, according to data from the Bankers Association of the Philippines (BAP).
The Philippine peso closed at P53.845 to the greenback, the strongest close of the peso since June 2022. Based on Bangko Sentral ng Pilipinas (BSP) data, the last time the peso was at the P53 level was on June 20, 2022, when it closed at P53.551.
Ateneo de Manila University Department of Economics Chairperson Alvin P. Ang said this strengthening may be due to the slower interest rate hike in the US.
“That’s [strengthening of the peso] okay for imports and can help reduce inflation. [This is] also a result of the Fed slowing [the] rate increase,” Ang told the BusinessMirror.
On Thursday, the US Federal Reserve decided to increase interest rates by only 25 basis points. This raised the interest rate in the US to 4.5 to 4.75 percent.
Ang said, however, that the strong performance of the Philippine currency is not an assurance that inflation will continue to slow in the coming months.
The war in Ukraine can still affect the supply of food and energy. Ang said this means the country cannot rely on external factors to bring down the cost of commodities locally.
“We must not be dependent too much globally,” Ang said. “Start local production capacity, [in] both food and manufacturing.”
Earlier, the BSP said the increase in commodity prices could still exceed 8 percent in January on the back of higher electricity and water rates, as well as expensive domestic petroleum prices.
BSP said inflation could settle within the range of 7.5 to 8.3 percent in January. This is still higher than the 8.1 percent posted in December 2022.
The central bank said the reduction in LPG prices as well as the peso appreciation could contribute to easing price pressures for the month.
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