Peso may further depreciate to 60 vs $1 territory in 2025

The Philippine peso may hit the 60:$1 level next year as the king dollar’s supremacy would likely continue, although its pass-through effect would unlikely result in another breach of the Bangko Sentral ng Pilipinas’ (BSP) inflation target, Bank of America (BofA) said.

Vincent Valdepeñas, country manager for the Philippines at BofA, said the greenback was expected to continue its rampage across other currencies as it enjoys safe-haven demand following the second US election victory of Donald Trump, whose threat to start a global trade war has spooked investors around the world.

READ: Peso hits record-low 59 as Trump 2.0 boosts dollar

But Valdepeñas said the projected weakness of the peso would not be “alarming,” adding that the pass-through effects on inflation would likely be offset by an expected decline in world oil prices.

Record low

As it is, BofA expects price growth to average 3 percent in 2025 which, if realized, would settle within the 2 to 4 percent inflation target of the BSP.

“What’s alarming is if it (peso) goes to like 65 to 70. But a peso within the 55-60 range is actually okay. The effects won’t be that high,” Valdepeñas told the Inquirer in an interview.

The Philippine peso had revisited the record-low 59:$1 level thrice this year as Trump’s tariff threats could stoke inflation stateside, a development that can slow the ongoing easing cycle of the US Federal Reserve.

The Fed last week delivered another quarter-point cut but signaled fewer reductions in 2025.

BSP unfazed

At home, the BSP capped 2024 with a third 25-basis point (bsp) cut, bringing the cumulative easing this year to 75 bps.

Governor Eli Remolona Jr. said the current weakness of the peso was not yet a cause for concern, adding that the central bank may open in 2025 with another rate cut.

READ: BSP closes 2024 with third rate cut

Valdepeñas said BofA expects the BSP to deliver two more quarter-point cuts each at the March and June meetings of the Monetary Board in 2025.

That projected pace of additional easing is similar to BofA’s outlook on the Fed, which may grapple with tariff-induced inflation in the US next year.

“There’s a lot of X factors. So they’re all guessing now. So we’re all guessing that it’s (Trump tariffs) going to be more inflationary. It won’t be as conducive to a lot of easing,” he said.