{"id":18350,"date":"2024-04-18T03:00:47","date_gmt":"2024-04-18T03:00:47","guid":{"rendered":"https:\/\/energybuzz.ph\/staging\/6915\/peso-wont-derail-rate-cuts-in-q4\/"},"modified":"2024-04-18T03:00:47","modified_gmt":"2024-04-18T03:00:47","slug":"peso-wont-derail-rate-cuts-in-q4","status":"publish","type":"post","link":"https:\/\/energybuzz.ph\/staging\/6915\/peso-wont-derail-rate-cuts-in-q4\/","title":{"rendered":"Peso won\u2019t derail rate cuts in Q4"},"content":{"rendered":"
\n

By Luisa Maria Jacinta C. Jocson, <\/b>Reporter<\/i><\/p>\n

THE Philippine central bank would cut its key rate as early as the fourth quarter despite the peso\u2019s slide to a 17-month low, according to Governor Eli M. Remolona, Jr.<\/p>\n

The Monetary Board might still cut policy rates in the fourth quarter, he told a news brief<\/span>ing on Wednesday. \u201cIf things are worse than we think, that might be postponed to the f<\/span>irst quarter of 2025.\u201d<\/p>\n

The peso and other regional currencies have weakened in recent days as markets bet against the odds of early rate cuts around the world. \u00a0 \u00a0<\/span><\/p>\n

The peso depreciated past the closely watched P57-a-dollar level on Tuesday before closing at P57 f<\/span>lat \u2014 the weakest since P57.375 on Nov. 22, 2022 \u2014\u00a0 <\/span>due to expectations that the US Federal Reserve would delay cutting interest rates.<\/p>\n

It continued to weaken on Wednesday, closing at P57.18 against the greenback.<\/p>\n

Mr. Remolona said the peso\u2019s depreciation has not been big enough to af<\/span>fect inflation expectations and monetary policy.<\/p>\n

\u201cI wouldn\u2019t say it\u2019s performing poorly,\u201d he said. \u201cI would say it\u2019s adjusting to some events. It initially weakened, along with other emerging market currencies, by the way, because of what\u2019s going on in the Middle East.\u201d<\/p>\n

Markets were rattled after Iran launched hundreds of drones and missiles against Israel at the weekend in retaliation for an alleged airstrike by Israel on the Iranian consulate in Syria earlier this month.<\/span><\/p>\n

But the Bangko Sentral ng Pilipinas (BSP) chief sees no threat from the con<\/span>f<\/span>lict. <\/span><\/p>\n

\u201cIn fact, the price of Brent oil and Dubai oil initially went up, but now has settled back down,\u201d he said. \u201cSo, the sense of the oil market is that hostilities will not escalate. I hope it stays that way.\u201d<\/p>\n

Brent futures for June fell by 0.44% or 40 cents to $89.62 a barrel by 6:32 a.m. GMT, while US crude futures for May fell by 0.56% or 48 cents to $84.88 a barrel, Reuters reported.<\/span><\/p>\n

Mr. Remolona said the peso\u2019s recent drop had been due to signals of rate cut delays by the Fed.<\/p>\n

\u201cThere\u2019s a postponement of when the FOMC (Federal Open Market Committee) will ease, in the eyes of the market,\u201d he said. \u201cThat has meant weakening of other currencies against the US dollar.\u201d<\/span><\/p>\n

\u201cIt\u2019s not a case of a weak peso, it\u2019s a case of a strong dollar. Unless the movements are very sharp, we tend to allow the adjustment to happen,\u201d he added.<\/p>\n

Federal Reserve Chairman Jerome H. Powell has said they might have to keep \u201crestrictive\u201d policy rates for longer amid sticky in<\/span>f<\/span>lation. <\/span><\/p>\n

NO RATE HIKE
\n<\/b>Markets were initially anticipating the US central bank to begin cutting rates by June, but this could get delayed to as late as September.<\/span><\/p>\n

\u201cEasing won\u2019t happen until maybe late in the third quarter when it comes to the FOMC,\u201d Mr. Remolona said. \u201cThe US inf<\/span>lation rate has remained very stubborn.\u201d<\/p>\n

The Fed hiked its fund rate by 525 basis points (bps) from March 2022 to July 2023 to 5.25-5.5%.<\/span><\/p>\n

Mr. Remolona said there won\u2019t be any rate increases this year unless inf<\/span>lation quickens faster than anticipated.<\/p>\n

Inflation sped up for a second straight month to 3.7% in March from 3.4% a month earlier. The BSP expects inf<\/span>lation to average 3.8% this year.<\/p>\n

\u201cWhat is scary is the de-anchoring,\u201d Mr. Remolona said. \u201cWhen we see that the markets and households begin to believe that in<\/span>f<\/span>lation will surge, then we have to consider a rate hike.\u201d<\/span><\/p>\n

\u201cBut otherwise, we\u2019re tight now. At 6.5%, it\u2019s already tight. It\u2019s already doing its work,\u201d he added.<\/p>\n

The central bank stood pat for a fourth straight meeting in March, keeping its benchmark rate steady at a near 17-year high of 6.5%. The Monetary Board raised borrowing costs by 450 bps from May 2022 to October 2023.<\/p>\n

Meanwhile, Fitch Solutions unit BMI said the peso might continue to depreciate in the next six months to two years amid weak economic fundamentals.<\/p>\n

\u201cIn the longer term, the currency will stay on its depreciatory trend, weakening to P57.20 per dollar by end-2025,\u201d it said in a report.<\/p>\n

Elevated in<\/span>f<\/span>lation will temper the currency\u2019s appreciation, it said. \u201cEmerging markets such as the Philippines generally see quicker price increases compared with advanced economies.\u201d<\/span><\/p>\n

\u201cHigher inflation in the Philippines may lead to a steady decline in the peso\u2019s value to preserve the country\u2019s competitiveness internationally,\u201d it added.<\/p>\n

BMI said it expects the peso to come under much <\/span>volatility in the short term due to the constant <\/span>repricing of interest rate expectations in the US.<\/span><\/p>\n

\u201cHowever, we think that this will eventually fade once the US Federal Reserve embarks on its first cut in July,\u201d it said. \u201cThis means that the Philippine peso will remain somewhat stable at P56.50 per dollar [by yearend].\u201d<\/p>\n

Philippine economic managers expect the peso to trade from P55 to P57 this year and from P55 to P58 from 2025 to 2028.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

THE Philippine central bank would cut its key rate as early as the fourth quarter despite the peso\u2019s slide to a 17-month low, according to Governor Eli M. Remolona, Jr.<\/div>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","footnotes":""},"categories":[1],"tags":[14644,2527,14878,15718,1744,2526],"class_list":["post-18350","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-bworldonline","tag-cuts","tag-derail","tag-peso","tag-rate","tag-wont"],"yoast_head":"\nPeso won\u2019t derail rate cuts in Q4 - Energy Buzz<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/energybuzz.ph\/peso-wont-derail-rate-cuts-in-q4\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Peso won\u2019t derail rate cuts in Q4 - Energy Buzz\" \/>\n<meta property=\"og:description\" content=\"THE Philippine central bank would cut its key rate as early as the fourth quarter despite the peso\u2019s slide to a 17-month low, according to Governor Eli M. 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