[central bank governor Amando Tetangco]

MANILA, JULY 8, 2011 (MALAYA) The peso yesterday closed at a 10-week high on market anticipation of another increase in the Bangko Sentral’s key rates after June inflation hit a 26-month high.

The currency closed at 42.89 to a dollar, 16 centavos higher than the other day’s close of 43.05.

This was peso’s highest close since May 11, 2011, when it stood at 42.88 against the greenback.

On Tuesday, the government announced that inflation for June went up to 4.6 percent on higher costs of utilities, transport and clothing.

Although the figure was still within the forecast range of the BSP, central bank governor Amando Tetangco stressed that pressures remain, prompting analysts to think that another round of rate hike is possible when the Monetary Board meets next on July 28.

But in an interview yesterday, Tetangco said the fundamental factors that influence the exchange rate are still positive.

"The BOP remains in surplus so you have more dollars coming in than more dollars going out. The prospects for continued economic growth are also still positive so it’s favorable to the peso," Tetangco said.

He added that the country had two credit rating upgrades in a period of one week and three in a period of six months, adding positive news for the economy.

He stressed that their policy is not really to favor any exchange rate or any exchange rate direction.

"Our policy is to smoothen the volatility in the movement. So if there is an appreciation we allow that; if there is depreciation we also allow that. But we have to make sure that there are no sharp movements that can be destabilizing," Tetangco said.

He said that right now the peso is in the middle of the range in terms of both appreciation and volatility.

"We are basically moving together with the other currencies. In fact, if you look at the real effective exchange rate, we are in the middle of the pack. (Other currencies) have appreciated more than the peso," he said.

The peso yesterday hit a high of 42.89 and a low of 43.05.

Total volume of trade reached $1.102 billion, almost $400 million more than Tuesday’s total volume of $754.59 million.

BSP at ease with policy stance By Iris C. Gonzales (The Philippine Star) Updated July 07, 2011 12:00 AMComments (0)

[Finance Secretary Cesar Purisima]

MANILA, Philippines - Despite the inflation rate reaching a 26-month high in June, the policy-making Monetary Board of the Bangko Sentral ng Pilipinas (BSP) remains comfortable with its policy stance.

“We’re still comfortable,” noted Finance Secretary Cesar Purisima, the government representative to the policy-making Monetary Board of the BSP.

Purisima also believes that oil price have tapered off and that inflation is easing.

However, he said that the position of the BSP may easily change, depending on developments that could affect inflation and oil prices.

Consumer prices rose to a 26-month high in June, according to the latest report from the National Statistics Office (NSO).

It said that inflation rate in June climbed to 5.2 percent, its fastest pace since the 5.6 percent recorded uptick in April 2009.

Soaring oil prices have been blamed for inflation although prices have been tapering off, allowing local oil firms to implement a 50-centavo price rollback last weekend.

“Higher annual increments were recorded in alcoholic beverages and tobacco; clothing and footwear; housing, water, electricity, gas and other fuels; transport, recreation and culture; education; and restaurants and miscellaneous goods and services index,” the NSO said.

In the first half of the year, the country’s inflation rate hit 4.7 percent which is near the top range of the three percent to five percent target of the BSP.

In May, inflation hit a revised five percent from the initially reported 4.7 percent.

Last June 16, the BSP kept interest rates unchanged but decided to raise the reserve requirement on deposits and deposit substitute of banks and non-banks with quasi-banking functions to siphon off at least P38 billion of excess liquidity in the financial system and counter any additional pressures.

As such, the overnight borrowing rate remained at 4.5 percent and the overnight lending rate at 6.5 percent.

The central bank adjusted interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid the escalating price of oil in the world market.

Chief News Editor: Sol Jose Vanzi

All rights reserved