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Business
BSP: Expect stronger peso, higher inflation

A Bangko Sentral ng Pilipinas (BSP) official said on Friday that the country could expect a stronger peso, higher inflation and lower interest rates for the current and next quarter.

Rosabel Guerrero, director of the BSP-Department of Economic Statistics said that, “expectations on key economic indicators showed that strong macroeconomic fundamentals are expected to be sustained in the current and next quarters.”

She said that respondents in the latest survey of the BSP showed that those expecting inflation to go up continue to outnumber those with the opposite view. But the number of people who see inflation going up declined, as indicated by the consumer index at 3.3 percent in the fourth quarter 2012 and 5.2 percent in first quarter 2013. These were from their quarter-ago levels of 5.4 percent and 11.5 percent, respectively.

“This indicates that inflation expectations remained well anchored, consistent with the BSP’s assessment of a manageable inflation environment,” Guerrero said.

The decline in the price of oil and sufficient supply of major food products including rice could have contributed to the lower inflation outlook, she added.

Also, more respondents expected the peso to appreciate in fourth quarter of the current year and first quarter of 2013.

“Expectations of the peso’s sustained appreciation could be due to the anticipated strong inflows of overseas Filipinos’ remittances, business process outsourcing services receipts and foreign investments as well as the recovery of export demand,” Guerrero said.

Meanwhile, interest rates are expected to decline in the current and next quarters, after the Monetary Board’s decision to cut policy rates by another 25 basis points in October 2012 following the rate cuts in January, March and July 2012 by 25 basis points each, the BSP said.

Because of this, the central bank may not need to shield the Philippines from the spiraling global economy by easing its monetary policy further.

A rate cut may also mean a weaker peso but the cost of sterilization is high and the BSP may not cut rates further “for that reason alone,” the central bank said. 

Refer http://www.manilatimes.net/index.php/business/top-business-news/35916-bsp-expect-stronger-peso-higher-inflation

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BSP: Expect stronger peso, higher inflation


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