Although the House Committee on Ways and Means rarely exercises its right to oversee the decisions of the Bangko Sentral ng Pilipinas (BSP) on monetary policy, Albay 2nd District Rep. Joey Salceda on Sunday, Oct. 16, said that BSP Governor Felipe Medalla would need to clarify how to fight the dollar, cool inflation, protect reserves, and earn more dollars.
The chair of the House Ways and Means panel believes that BSP will “more likely” do a 75 basis points interest rate hike in the next meeting of the Monetary Board on Nov. 17 “to maintain a healthy gap between Philippine and US Fed rates.”
He said this amid earlier expectations that the BSP will do a 50 basis points interest rate hike.
“Between 50 and 75, I’m inclined to say they’ll do 75. In any case, the House Committee on Ways and Means will exercise its privilege and jurisdiction over monetary policy. We will meet with monetary policymakers, but it won’t be on-the-spot, so we don’t unduly pressure what should be an independent body,” the lawmaker added.
In a statement, Salceda stated that he wants to make sure “the BSP is not killing some growth for nothing. I want to know what their projected impact on the currency and reserves is. Because fighting the dollar can be a very expensive and ultimately futile act.”
While a 75-basis-point move will ease the pressure on the peso and slow down inflation, it sets to hurt the country’s road to economic recovery.
The lawmaker said that Congress will invite Medalla so they can all understand how to bolster the country’s dollar reserves and earn more dollars at the same time.
Part of BSP’s strategy should be to “work with national government agencies to increase our dollar earnings.”
“It’s not conventional of monetary policymakers to dip deeply into the real economy, but given the very limited tools that the BSP possesses, and given how ineffective these tools could be against an overwhelmingly strong dollar, earning more dollars must be part of the BSP’s work with other agencies in the real sector,” Salceda said.
Policymakers in the country, which became home to Southeast Asia’s worst performing currency this year and among the region’s fastest inflation, are under pressure to halt the peso’s slide against the US dollar and stop price hikes.
According to Salceda’s office, the peso dropped more than 13 percent this year, one of the steepest among major Asian currencies.
So far, the country’s central bank has already hiked the key rate by 225 basis points so far this year, the most among the 10 member-states of the Association of Southeast Asian Nations (ASEAN).
“We can’t influence the Fed, but the Fed influences our own decision-making. So what the US does counts for everything,” the lawmaker said.
Medalla earlier explained that every 25 bps increase in rates decreases gross domestic product (GDP) growth by five bps.
“So, what’s next is we need to make sure these cuts are balanced out by more dollar earnings, probably in tourism, BPOs (business process outsourcing), OFWs (overseas Filipino workers), and freelancers with foreign clients. And I will have the Committee discuss this with our policymakers,” Salceda said.
His committee oversees monetary policy decisions of the BSP, as its mandate includes “all matters directly and principally relating to the fiscal, monetary and financial affairs of the national government.”
The Albay lawmaker said that the BSP needs “to explain how bad or how manageable the situation is, and what’s in our toolkit.”