{"id":18539,"date":"2024-05-01T03:10:09","date_gmt":"2024-05-01T03:10:09","guid":{"rendered":"https:\/\/energybuzz.ph\/staging\/6915\/currency-depreciation-may-put-central-banks-under-pressure-to-tighten\/"},"modified":"2024-05-01T03:10:09","modified_gmt":"2024-05-01T03:10:09","slug":"currency-depreciation-may-put-central-banks-under-pressure-to-tighten","status":"publish","type":"post","link":"https:\/\/energybuzz.ph\/staging\/6915\/currency-depreciation-may-put-central-banks-under-pressure-to-tighten\/","title":{"rendered":"Currency depreciation may put central banks under pressure to tighten"},"content":{"rendered":"
\n

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

CONTINUED CURRENCY de<\/span>preciation in Asia and the Paci<\/span>f<\/span>ic could add to in<\/span>f<\/span>lationary pressures and prompt central banks to raise interest rates again, the International Monetary Fund (IMF) said.<\/span><\/p>\n

\u201cIf exchange rates depreciate and pass through to higher in<\/span>f<\/span>lation, then there is reason to tighten monetary policy. Otherwise, allow the exchange rate to act as a bu<\/span>f<\/span>fer against shocks. I think that could hold you in good stead,\u201d Krishna Srinivasan, director of the IMF\u2019s Asia and Paci<\/span>f<\/span>ic Department, said in a webinar on Tuesday.<\/span><\/p>\n

\u201cInterest rate dif<\/span>ferentials will likely put pressure on currencies to depreciate. This can create a dilemma for Asian central banks, including for the Philippines,\u201d he added.<\/p>\n

On Tuesday, the peso closed at P57.76 against the dollar, weakening by 8.5 centavos from its P57.675 finish on Monday. This month, the peso depreciated to the P57 level for the first time since November 2022.<\/p>\n

\u201cIt\u2019s important to allow the exchange rates to be the buffer against shocks so that you can meet your price stability objectives, your external objectives and so on,\u201d Mr. Srinivasan said.<\/p>\n

\u201cIf the exchange rate movements are leading to higher pass-through, then there might be a reason to tighten interest rates. But otherwise, just look to see what\u2019s happening to domestic inf<\/span>lation and tailor your policies accordingly,\u201d he added.<\/p>\n

The Monetary Board has hiked borrowing costs by 450 basis points from May 2022 to October 2023, bringing the policy rate to a near 17-year high of 6.5%.<\/p>\n

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. has said that they \u201cstand ready to manage any unnecessary movement and excessive volatility.\u201d<\/p>\n

The IMF said that central banks should focus on domestic price stability and should not be \u201coverly dependent\u201d on the US Federal Reserve\u2019s own policy moves.<\/p>\n

\u201cI think that\u2019s the point we\u2019d like to make here, that don\u2019t get yourself too tied to what the Fed does,\u201d Mr. Srinivasan said.<\/p>\n

Mr. Remolona had said that the peso\u2019s recent drop was due to the strong US dollar and expectations of rate cut delays by the Fed.<\/span><\/p>\n

Markets are now pricing in the chance of a rate cut in September from initial expectations of June. US Federal Reserve Chairman Jerome H. Powell earlier said they might have to keep \u201crestrictive\u201d policy rates for longer amid sticky in<\/span>f<\/span>lation.<\/span><\/p>\n

Mr. Srinivasan also said that most Asian countries are now better placed to cope with exchange rate movements due to \u201cfewer financial frictions and better macro fundamentals and institutional frameworks and should continue to allow the exchange rate to act as a buffer against shocks.\u201d<\/p>\n

GROWTH OUTLOOK
\n<\/b>Meanwhile, the IMF kept its growth forecast for the Philippines at 6.2% for both 2024 and 2025.<\/p>\n

\u201cThe Philippines is one country which has done very well in terms of the growth is being resilient (and) inflation is coming down,\u201d Mr. Srinivasan said.<\/p>\n

This year, the government is targeting a 6-7% growth. First-quarter gross domestic product (GDP) data will be released on May 9.<\/p>\n

In 2023, the economy grew by a weaker than expected 5.5%.<\/p>\n

The IMF said that growth in the overall Asia-Pacific region will remain resilient.<\/p>\n

\u201cThe region remains inherently dynamic and will contribute about 60% of global growth this year, but it will slow down, growing 4.5% in 2024 after 5% in 2023,\u201d he said.<\/p>\n

\u201cDrivers of growth are as diverse as the region, ranging from resilient domestic consumption in most ASEAN countries, to strong public investment in China, and most notably in India, and to a sharp uptick in tourism in the Pacific island countries.\u201d \u2014 Luisa Maria Jacinta C. Jocson<\/b><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

CONTINUED CURRENCY depreciation in Asia and the Pacific could add to inflationary pressures and prompt central banks to raise interest rates again, the International Monetary Fund (IMF) said.<\/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":[14915,14644,1810,17638,17636,170,2744,5415,17637,885],"class_list":["post-18539","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-banks","tag-bworldonline","tag-central","tag-currency","tag-depreciation","tag-may","tag-pressure","tag-put","tag-tighten","tag-under"],"yoast_head":"\nCurrency depreciation may put central banks under pressure to tighten - 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\/currency-depreciation-may-put-central-banks-under-pressure-to-tighten\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Currency depreciation may put central banks under pressure to tighten - 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