Peso sinks on tariff, Fed easing concerns

THE PESO dropped sharply against the dollar on Tuesday amid lingering uncertainty over the Trump administration’s tariff plans and following hawkish comments from a US Federal Reserve official.

The local unit closed at P57.60 per dollar on Tuesday, sinking by 28 centavos from its P57.32 finish on Monday, Bankers Association of the Philippines data showed.

The peso opened Tuesday’s session slightly stronger at P57.31 against the dollar. Its worst showing was at P57.61, while its intraday best was at P57.30 versus the greenback.

Dollars exchanged went up to $1.54 billion from $1.098 billion on Monday.

“The dollar-peso traded lower on risk-off sentiment amid trade uncertainty and prospects of a narrowing interest rate differential after Bostic signaled last night the possibility of just one rate cut versus the BSP’s (Bangko Sentral ng Pilipinas) signal of 75 bps (basis points),” a trader said in a phone interview.

Federal Reserve Bank of Atlanta President Raphael Bostic said he now sees just one interest rate cut as likely this year, rather than two, with tariff hikes impeding progress on disinflation, Bloomberg reported.

“I moved to one mainly because I think we’re going to see inflation be very bumpy and not move dramatically and in a clear way to the 2% target,” Mr. Bostic said on Monday in an interview with Bloomberg Television in Atlanta. “Because that’s being pushed back, I think the appropriate path for policy is also going to have to be pushed back.”

In a discussion with Bloomberg journalists after his television appearance, the Atlanta Fed chief emphasized that uncertainty caused by President Donald J. Trump’s frequent policy changes are making economic forecasting more difficult.

Mr. Bostic said the introduction of more tariffs added upside risk to inflation, and a decline in sentiment or a rise in layoffs would present downside risks to employment. Yet he also emphasized he’s waiting until policy changes are implemented before further adjusting his forecasts.

“Given how rapidly policy changes from week to week and month to month, it’d be very difficult for me to, with any confidence, take on board things until we’ve actually seen them put in place and sticking,” he said.

Fed Chair Jerome H. Powell, speaking last week ofter the Fed left rates unchanged, reiterated that officials are in no hurry to adjust rates, saying the US economy is on solid footing despite sagging consumer sentiment.

Mr. Powell said he expects the inflationary impact of tariffs will be transitory, signaling officials can look through the price effects of tariffs and lower rates if the labor market weakens substantially — so long as long-term inflation expectations remain stable.

Meanwhile, the Philippine central bank appears on track to resume rate cuts in April, BSP Governor Eli M. Remolona, Jr. said on Tuesday.

“We are on an easing cycle. There is a good chance we will cut by 25 basis points,” the Bangko Sentral ng Pilipinas chief said in an interview with Bloomberg Television’s David Ingles on the sidelines of the HSBC Global Investment Summit in Hong Kong.

Cumulative rate cuts could reach as much as 75 basis points for the year depending on data, said Mr. Remolona, flagging “somewhat more upside risk than downside risk” for inflation in 2025 and 2026. The Philippines last lowered borrowing costs in December and unexpectedly paused its easing in February.

The dollar was also supported by the continued increase in global crude oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message.

For Wednesday, the trader expects the peso to move between P57.30 and P57.80 per dollar, while Mr. Ricafort said the exchange rate could range from P57.50 to P57.70. — A.M.C. Sy with Bloomberg