Peso edges higher as April inflation data bolster BSP rate hike hopes
THE PESO inched higher against the dollar on Tuesday as faster-than-expected April headline inflation supported bets of more rate hikes by the Bangko Sentral ng Pilipinas (BSP).
The currency closed at P61.55 a dollar, rising by 1.5 centavos from its P61.565 finish on Monday, according to Bankers Association of the Philippines data posted on its website.
This was after it traded below its latest record-low close of P61.567 for most of the session. The peso opened Tuesday’s trading at P61.69 and dropped to a trough of P61.74 against the greenback — just a tad stronger than its record intraday low of P61.75. Meanwhile, its best showing was its closing level.
Dollars traded declined to $1.195 billion on Tuesday from $1.22 billion on Monday.
“The peso slightly gained today as the stronger-than-expected Philippine inflation report for April fueled hawkish views that the BSP might consider a more aggressive policy stance amid growing inflationary headwinds to the Philippine economy,” a trader said in an e-mail.
Philippine headline inflation surged to 7.2% in April, up sharply from the 4.1% in March and 1.4% a year ago, the government reported on Tuesday.
This was the fastest headline print in over three years or since the 7.6% recorded in March 2023. This was also well above the 5.5% median estimate in a BusinessWorld poll of 17 analysts and the central bank’s 5.6%-6.4% forecast for the month.
April also marked the second straight month that the consumer price index was above the BSP’s 2%-4% tolerance band.
For the first four months, inflation averaged 3.9%.
On April 23, the Monetary Board hiked benchmark interest rates by 25 basis points for the first time in over two years, bringing the policy rate to 4.50%, as the Middle East war has caused its inflation outlook to deteriorate further.
BSP Governor Eli M. Remolona, Jr. has signaled further tightening ahead via “a succession of modest rate hikes” to help temper spiraling prices.
“The BSP is committed to fulfilling its primary mandate of slow inflation and will take necessary actions to ensure inflation returns to its 3% target within a reasonable time. It will remain vigilant for spillover effects, data-driven, and ready to act as needed,” Mr. Remolona said in a statement on Tuesday following the April data release.
For Wednesday, the trader said the peso may move between P61.40 and P61.65 per dollar amid the release of the latest Philippine labor data. — Aaron Michael C. Sy
