By Aaron Michael C. Sy
THE Philippine peso weakened on Thursday as investors await the release of April inflation data, which the central bank will probably consider at its next policy meeting.
The currency closed at P55.35 a dollar, 1.5 centavos weaker than Wednesday’s close, according to data posted on the Bankers Association of the Philippines website.
The peso opened at P55.20 a dollar, weakened to as much as P55.38 and gained to as much as P55.13 against the greenback. Dollars traded rose to $1.368 billion from $1.054 billion on Wednesday.
“The peso ended sideways as investors look to tomorrow’s inflation report as this could have implications for monetary policy,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in a Viber message.
Inflation likely slowed further in April amid lower food prices, electricity rate cuts and favorable base effects, analysts said.
A BusinessWorld poll of 14 analysts yielded a median estimate of 7% for April inflation, settling near the upper end of the cenral bank’s 6.3-7.1% estimate.
This could be slower than 7.6% in March, but faster than 4.9% in April 2022. This will also be the slowest since 6.9% in September.
It will still be higher than the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target for the 13th straight month. The local statistics agency is set to release inflation data on May 5.
BSP Governor Felipe M. Medalla said last month the Monetary Board could consider pausing its tightening cycle at its May 18 meeting if inflation eased further in April.
The central bank last month hiked borrowing costs by 25 basis points (bps) to help bring down inflation, bringing its policy rate to a 16-month high of 6.25%. It has raised key rates by 425 bps since May 2022.
Mr. Mapa said investors were also positioning for US job data that will be out on Friday.
The peso also weakened after the widely expected 25-bp rate hike by the US Federal Reserve and signals of a possible pause, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Fed raised rates for a 10th straight time at its May 2-3 meeting, bringing its key rate to 5% to 5.25%, Reuters reported. The Fed has hiked borrowing costs by 500 bps since March 2022,.
Meanwhile, Fed Chairman Jerome H. Powell said it was now an open question whether further increases were warranted in an economy that is still facing high inflation, but also showing signs of a slowdown and with risks of a tough credit crackdown by banks on the horizon.
“We’re closer, or maybe even there,” he said.
Mr. Ricafort expects the peso to trade between P55.25 and P55.45 a dollar on Friday.