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PHILIPPINE monetary authorities recognized Thursday the
good a strong peso plays in keeping inflation
manageable, but reiterated they would pursue a policy of
leaving the exchange rate to market forces even if this
means a more arduous monetary management.
“We
don’t have a strong peso policy. Rather, the policy is
to leave the determination of the exchange rate largely
to market forces. By implication, we don’t really use
the exchange rate to manage inflation, although a
stronger peso helped temper inflation in 2007,” Bangko
Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr.
said in an e-mail from Madrid, Spain.
His
comments were sparked by observations on the peso having
slipped against the dollar in recent months. The peso
slipped to P42.61 per dollar Thursday.
Analysts
said the exchange rate slipped due to heightening risk
aversion.
During a
briefing Thursday BSP Deputy Governor Diwa Guingundo
highlighted key elements to inflation during the first
quarter.
Guinigundo earlier reported on foreign portfolio funds
having flowed out of the country on net basis by $197.7
million in March versus net inflows totaling $370.9
million the previous February and net inflows of another
$173.2 million in March last year.
“The
global slowdown has affected our country in a number of
ways, including increasing risk aversion as indicated by
foreign-fund outflows,” Guinigundo said.
Analysts
have raised the question of whether or not it will be to
the BSP’s advantage to support the peso to a certain
extent.
Tetangco
quickly dismissed the notion, saying it was never policy
for the BSP to target a particular exchange rate.
He did
recognize, however, that the strong peso helped the
economy weather last year’s worries that included
elevated oil and nonoil prices and the credit crunch
resulting from concerns over the unraveling of the
subprime-credit crisis in the
US.
The BSP
previously calculated that each peso worth of
appreciation translates to a .04-percent decrease in
inflation.
The
moderating impact of a strong peso, therefore, appeals
to some sectors of the economy.
But
Tetangco prefers to stay away from what analysts call a
“managed float regime” to reign in inflation. |
