For the third straight day, the peso hit new record lows
(Eagle News) — The Philippine peso fell to a new record low of 58.49 pesos per U.S. dollar on Thursday, September 22, the third straight day the peso had fallen to a record low.
On Wednesday, February 9th, the peso fell to 58 pesos per dollar, and the day before, Tuesday (September 20th), it closed at 57.48 pesos.
This came as the US Federal Reserve hiked interest rates again to curb rising prices in the US.
This Fed rate hike led to sharp losses in Asia, Europe and Wall Street.
Also in Japan, the yen fell to a fresh 24-year low against the dollar on Thursday, with the greenback rallying to nearly 146. This prompted the Japanese Treasury to intervene in the foreign exchange market to strengthen the yen.
The British pound also briefly fell to a fresh 37-year low of $1.1212, although the Bank of England was preparing to announce its second record rate hike later on Thursday, according to a report by Agence France Presse.
The euro also fell to a 20-year dollar low.
-PHL Monetary Board hikes interest rates-
In the Philippines, the Monetary Board decided to increase the interest rate on the Bangkok Sentral ng Pilipinas overnight reverse repurchase facility by 50 basis points to 4.25 percent, effective tomorrow, September 23.
“The latest baseline projections from GNP show that average inflation in 2022 is still expected to be 5.6 per cent, above the high end of the 2 to 4 per cent target range. The forecast for 2023 was also slightly increased to 4.1 percent. In the meantime, the forecast for 2024 has eased to 3.0 percent,” said the BSP on Thursday, April 9th.
In deciding to raise interest rates again, the Monetary Board noted that price pressures continue to mount.
A press release said that “the rise in core inflation points to emerging demand pressures on inflation.”
“Additionally, second-round effects continue to materialize as inflation expectations remain elevated in September following approved minimum wage and fare increases. Nonetheless, medium-term inflation expectations remain broadly anchored,” it said.
In this month of September alone, the peso has made eight new lows.
On Sept. 2, the peso fell to Ps.56.77 to the US dollar. On Sept 5 it went further to Ps 56.99 per dollar. The following day, 6/9, the peso fell to P57: $1. Two days later, on the 8/9, the peso fell further to P57.18 against the greenback. On Sept 16, it slipped further to P57.43 and on the 16th 20, it fell to P57.48.
The US Federal Reserve could make further rate hikes to protect the US dollar.
-Fed expects rate hike to continue-
Federal Reserve Chair Jerome Powell warned that the process to recover from the highest inflation in 40 years will bring some pain.
It was the third straight 0.75 percentage point hike by the Fed’s policy-setting committee, the Federal Open Market Committee (FOMC), continuing aggressive action that included five hikes this year.
The hike brings the policy rate to 3.0-3.25 percent, and the FOMC said it expects “ongoing hikes…will be appropriate.”
“We have to get inflation behind us. I wish there was a pain free way to do this. There isn’t,” Powell said.
The Federal Reserve signaled stronger US interest rate hikes.
Soaring prices are putting pressure on American families and businesses and have become a political burden for President Joe Biden as he faces the congressional elections in early November.
But a contraction in the world’s largest economy would be a more damaging blow to Biden and the world at large.
Powell has made it clear officials will continue to act aggressively to cool the economy and avoid a repeat of the 1970s and early 1980s, when US inflation last spiraled out of control.
It took tough action – and a recession – to bring prices down in the 1980s, and the Fed is unwilling to give up its hard-won credibility in the fight against inflation.
The Fed’s quarterly forecasts, released with Wednesday’s interest rate decision, show that FOMC members expect US GDP growth to be flat this year, rising just 0.2 percent. But they see a return to expansion in 2023, with annual growth of 1.2 percent.
They forecast more rate hikes this year — 1.25 percentage points in total — and more in 2023, with no cuts through 2024.
Inflation is a global phenomenon amid the Russian war in Ukraine, in addition to global supply chain snarls and China’s Covid lockdowns, and other major central banks are also taking action.
(With a report by Agence France Presse)