A weakening Philippine peso won’t spur inflation, central bank Governor Amando Tetangco said, even as the currency heads for its biggest annual loss since 2008.
“The peso weakness of late is not viewed as a significant factor or risk factor for inflation,” Tetangco said today in a Bloomberg TV interview with Rishaad Salamat. “Policy continues to be a flexible exchange-rate system. The central bank comes into the market only to smoothen excessive volatilities.”
Bangko Sentral ng Pilipinas yesterday held its benchmark interest rate at a record-low 3.5 percent for a ninth meeting and raised its inflation forecast for next year. The peso has fallen more than 7 percent this year, as investors assess the potential impact of impending tapering of U.S. Federal Reserve stimulus on emerging markets.
The central bank yesterday cut its inflation estimate for this year to 2.9 percent from 3 percent in October, and raised its estimate for next year to 4.5 percent. It lowered its 2015 forecast to 3.24 percent from 3.4 percent earlier.
While global economic conditions remain challenging, prospects for domestic activity are likely to remain firm in the Philippines, Tetangco said today. Policy makers are watching out for second-round inflation effects even as price pressures are expected to be temporary, he said.
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