MANILA — The Philippine central bank will keep monetary policy settings restrictive as it works to keep inflation in check, as the peso currency weakens in line with global conditions, a senior official said on Thursday.

Despite external headwinds, the Bangko Sentral ng Pilipinas (BSP) remained optimistic that macroeconomic conditions would be favorable in 2024 and 2025, BSP Senior Assistant Governor Iluminada T. Sicat told a business forum.

Inflation would stay within the 2% to 4% target this year and the next, Ms. Sicat said.

The central bank’s key policy rate is at a 17-year high of 6.5% after a series of rate hikes last year to tame inflation, which hit a 14-year peak of 8.7% in January 2023.

Inflation fell to a low of 2.8% in January 2024 but has since risen to 3.9% in May. The average inflation for the first five months of the year was 3.5%.

Ms. Sicat said the peso remained influenced by the broad strength of the US dollar.

“The movement of the peso is not volatile,” she told reporters on the sidelines of the forum, adding the central bank has scope to intervene if it sees any signs of market stress.

The peso’s weakness is largely based on market expectations that the US Federal Reserve will keep interest rates higher for longer and due to stronger demand for US dollars from imports, Ms. Sicat said.

The peso closed at P58.78 a dollar on Thursday, inching down by 2.5 centavos from the previous day’s finish of P58.755. Year to date, the local unit is now down by P3.41 from its end-2023 close of P55.37 against the greenback. — Reuters