High inflation may linger and further weaken the Philippine peso, think tanks said, even as the Bangko Sentral ng Pilipinas (BSP) insists that prevailing elevated prices will only be temporary.
“For several major emerging markets, including Brazil, South Africa, Turkey, Colombia, Indonesia, and the Philippines, we think inflation may rise more significantly, and result in more considerable falls in their currencies,” London-based Capital Economics said in its Sept. 30 report “What would an era of higher inflation mean for currencies?”
A separate report of Dutch financial giant ING said Asian currencies were already taking a beating from the US dollar’s surge ahead of a looming tapering, or slowing down on asset purchases like bonds to stimulate the economy, by the US Federal Reserve.
“Anecdotally, we hear that the BSP, the Philippines’ central bank, has been active in the market trying to prevent a 51:$1 breach. That level is holding for now, but experience suggests that central banks aren’t all that effective except in the very short term if the market is set on going in a particular direction,” ING Asia-Pacific research head Robert Carnell said in his Sept. 30 analysis titled “Asian FX catches flak.”
Inflation averaged 4.4 percent as of end-August, above the BSP’s 2-4 percent target range of manageable price hikes, mainly due to expensive food like pork, fish and vegetables.