“Frankly, there’s not much we can do.”
House Ways and Means chairman Joey Sarte Salceda expects the Philippine peso to continue tanking against the United States dollar after falling to an all-time low of 58.49 on Thursday, September 22.
Salceda said the peso could plunge to as low as 65 to 68 to the dollar in the near term as US Federal Reserve Chairman Jerome Powell vowed to raise interest rates to fight inflation “until the job is done. ”
“To return to stable core inflation, the US needs to achieve five percent disinflation that it achieved in the early 1980s, and that took 6500 basis points in interest rate hikes. The Fed under Powell has so far increased the Fed rate by just 2250 basis points. So, hang on. This is still bound to be quite a ride,” said Salceda.
“There is no resistance. There is no anchor, so to speak. So, I can see the dollar sustaining its strength against the peso. It will continue,” Salceda added.
He based his gloomy projection on the peso-dollar exchange rate history, specifically the period of currency weakness during the first Marcos administration when the local currency depreciated by as much as 41 percent in the early 1970s.
“Depending on where you start counting, the Philippine peso has depreciated by 18 percent to 23 percent against the dollar during this period of depreciation. So, if history repeats, there’s quite some way to go,” Salceda said.
He said President Ferdinand Marcos Jr. and Bangko Sentral ng Pilipinas Governor Benjamin Diokno are virtually helpless in stemming the peso’s continued deep dive.
“The BSP will not be able to sustain a policy of keeping our interest rate differential with the US. We can’t raise rates too aggressively without sacrificing economic recovery because the currency depreciation isn’t primarily our fault. We can’t do much to protect the peso,” said Salceda.