Philippines to intervene more forcefully in streaks of weak peso

THE Philippine central bank is intervening more forcefully during periods of extended peso weakness as part of a new strategy, gradually moving away from day-to-day intervention, Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said.

The BSP adopted a new formula that determines the magnitude of peso losses that require stronger intervention to curb price pressures, Mr. Remolona said in an interview Tuesday. He declined to elaborate on the formula.

“We worry when there’s a whole streak of peso depreciation,” Mr. Remolona said at his office in Manila. “It leads to inflation and then we start to worry, and then we might intervene more forcefully.”

The peso reversed its losses and strengthened as much as 0.4% to 57.41 per dollar following the central bank chief’s comments, outperforming other Asian currencies.

Global financial markets are turning volatile as traders grapple with US tariffs and speculation for more Federal Reserve interest-rate cuts. The Philippine peso slid 3.4% in July before rebounding this month.

P59 PER DOLLAR
The BSP used to intervene to smoothen day-to-day volatility, the BSP chief said. “We now understand there are thresholds: a depreciation of the peso doesn’t cause inflation to go up until it’s enough of a depreciation,” he said.

The governor also said “there’s a risk” of the local currency dropping again to the record low of P59 per dollar, given the peso’s volatility though he said authorities aren’t worried about specific levels.

Mr. Remolona said the BSP tries to smoothen the peso’s volatility “in a subtle way.” “We’re not trying to get rid of the swing. We’re just trying to dampen the swing,” he said.

The central bank chief also said policymakers may deliver two more quarter-point cuts in the key interest rate this year, with the easing cycle likely to continue in 2026 on tame inflation.

Mr. Remolona’s “signal of further easing reflects confidence that inflation is on a firm downward trajectory and that external conditions remain broadly manageable,” said Sarah Tan, economist at Moody’s Analytics in Singapore.

“Still, we think that the space is limited,” she said, pointing to risks such as a weaker peso or delayed easing by the Fed that could narrow the window for more aggressive rate cuts in the Philippines without risking capital outflows or reigniting inflation.

“We expect the BSP to continue easing into 2026, but with intermittent pauses to assess the impact of earlier cuts,” she added. — Bloomberg