MANILA—The Philippine peso is not expected to depreciate against the greenback as a result of the Federal Reserve’s decision to keep growth forecasts for the US for 2017 and 2018.
In a statement, EastWest Bank president and CEO Antonio Moncupa Jr. said the Fed’s decision to keep its 2.1 percent growth target for 2017 and 2018, despite hiking the Fed funds rate to a range between 0.75 to one percent, leans on the projection that inflation will remain manageable.
“The immediate result was a general weakening of the US dollar and flattening of the US yield curve,” he said, citing that “this somehow helps the peso avoid depreciation.”
Since the Fed’s decision to hike key rates after the March 14-15 meeting of its rate setting Federal Open Market Committee (FOMC), the peso has slightly strengthened.
On Monday, it closed at 50.09 from last Friday’s 50.18 finish.
It traded between a range of 50.09 and 50.19 in the first trading day this week.
With inflation seen to remain manageable, Moncupa does not expect the Bangko Sentral ng Pilipinas (BSP) to adjust key rates on Thursday during the second policy meeting of the central bank’s policy-making Monetary Board (MB).
This is in line with the expectations of most analysts, with the earliest projected hike to happen mid-year.
Moncupa also expects an above six percent expansion for the Philippine economy this year.
The government’s growth target this year is a range between 6.5 to 7.5 percent.
“Given all these, we share the market view that interest rates are expected to rise this year. Even while the BSP is not expected to raise its policy rate in its March 23 meeting, we share the market view of a likely increase in May and/or June,” Moncupa added.