PHL peso dips to new low, P58.49 for one US dollar, as US Federal Reserve raises interest rates again

Third consecutive day that weight reached new record lows

(File photo) A customer counts Philippine pesos banknotes after exchanging his US dollars for Philippine pesos in Manila on September 8, 2015. AFP PHOTO / Jay DIRECTO / AFP PHOTO / JAY DIRECTO

(Eagle News) – On Thursday, Sept. 22, the Philippine peso fell to a new all-time low of P58.49 for one US dollar, the third consecutive day that the peso had fallen to an all-time low.

On Wednesday 21 September, the peso dropped to P58 to one dollar and the previous day, Tuesday (20 September), it closed at P57.48.

This happened when the US Federal Reserve again raised interest rates to curb the price surge in the US.

This Fed rate hike led to heavy losses in Asia, Europe and Wall Street.

In Japan, the yen fell to a new 24-year low against the dollar on Thursday, with the greenback climbing to nearly 146. This prompted the Japanese finance ministry to intervene in the currency market to strengthen the yen.

The British pound also dropped briefly to a new 37-year low at $ 1.1212, although the Bank of England was preparing to announce its second consecutive rate hike later on Thursday, according to a report by Agence France Presse.
The euro also fell to a 20-year low of the dollar.

-PHL Monetary Commission raises interest rates-

In the Philippines, the Monetary Council has decided to raise the interest rate on the overnight reverse repurchase of Bangkok Sentral ng Pilipinas by 50 basis points to 4.25%, with effect from tomorrow, 23 September.

“The latest baseline forecast from the BSP shows that average inflation is still expected to exceed the upper end of the target range of 2-4% to 5.6% in 2022. The forecast for 2023 has also increased slightly to 4, 1%. Meanwhile, the forecast for 2024 drops to 3.0%, “the BSP said Thursday 22 September.

In deciding to raise the reference rate again, the Monetary Committee noted that price pressures continue to increase.

In a statement, he said that “rising core inflation indicates emerging demand-side pressures on inflation.”

“In addition, second-round effects continue to manifest, with inflation expectations remaining high in September following the approval of minimum wage and freight rate increases. However, inflation expectations continue to be broadly anchored over the medium term, “she said.

In this September alone, the peso recorded eight times new lows.

On 2 September, the peso fell to P56.77 for one US dollar. On September 5th it fell further to P56.99 for one dollar. The next day, on September 6, the peso dropped to P57: $ 1. Two days later, on 8 September, the peso plunged further to P57.18 to the greenback. On 16 September it slipped further to P57.43 and on 20 September it dropped to P57.48.

There may be further rate hikes by the US Federal Reserve to protect the US dollar.

-The US Federal Reserve should continue to raise rates-

US Federal Reserve Chairman Jerome Powell warned that the process of conquering the highest inflation of the past 40 years will come with difficulties.

It was the third consecutive 0.75 percentage point hike by the Fed’s Federal Open Market Committee (FOMC), which continues the vigorous action that has 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 need to raise inflation. I wish there was a painless way to do it. There isn’t, ”Powell said.

The Federal Reserve has signaled further strong interest rate hikes in the United States.

Rising prices are putting a strain on American households and businesses and have become a political responsibility for President Joe Biden as he faces midterm Congressional elections in early November.

But a contraction of the world’s largest economy would be a more damaging blow to Biden and the world at large.

Powell made it clear that officials will continue to act aggressively to cool the economy and prevent a repeat of the 1970s and early 1980s, the last time US inflation spiraled out of control.

It took hard action – and a recession – to finally bring prices down in the 1980s, and the Fed is unwilling to give up its hard-won, inflation-fighting credibility.

The Fed’s quarterly forecast released with the rate decision on Wednesday shows that FOMC members expect US GDP growth to be practically flat this year, rising just 0.2%. But they see a return to expansion in 2023, with annual growth of 1.2%.

They expect further rate hikes this year, totaling 1.25 percentage points, and more in 2023, with no cuts until 2024.
Inflation is a global phenomenon in the midst of the Russian war in Ukraine, in addition to global supply chain hiccups and Covid blockades in China, and other major central banks are also taking action.

(With a report from Agence France Presse)