For as long as there is no credible threat to this inflation outlook, the BSP has the flexibility to keep its monetary policy settings even with short-term volatility in the exchange rate and the current account balance. At the same time, the weakening of the peso is in line with the general trend among emerging market currencies, given the ongoing normalization of monetary policy in the United States. It would also be useful to know that the impact of exchange rate fluctuations on domestic inflation in the Philippines has actually declined in recent years. Moreover, the observed narrowing of the current account surplus is driven in large part by the robust growth of imports of capital goods, intermediate goods, and raw materials. At the moment, therefore, the BSP sees no compelling reason to adjust its monetary policy settings in response to the weaker peso.

Source: Manila Times February 08, 2017 16:30 UTC