Malacañang is not calling the shots on monetary policy, the Department of Finance (DOF) said as it defended the independence of the Bangko Sentral ng Pilipinas from politics.
Finance Secretary Benjamin E. Diokno said the Bangko Sentral ng Pilipinas (BSP) will continue to preserve its independence from the country's political leadership despite growing global uncertainty and inflationary pressures.
“I've always been transparent: I say what I mean, and mean what I say. The Executive will respect the independence of the BSP. Such position has served us well in the past, it should serve us well in the future,” said Diokno, a former central bank governor.
The finance chief’s statement follows his pronouncement last week that the government was ready to prevent the peso sliding beyond the 60 to the US dollar threshold.
Diokno added that if he were central bank governor, he will be willing to deploy around $10 billion in the final three-months of the year to support the local currency against the strong US dollar.
The DOF chief also suggested that the the central bank’s key interest rates should rise by 100 basis points before year-end in conjunction with actions made by the US Federal Reserve.
Diokno’s policy direction, who as President Marcos’ finance chief sits on the BSP's monetary board, was perceived by many as an undue pressure on the central bank, an independent body.
Sought for comment, Diokno explained that transparency has always been his “management style.”
“That has been my management style in contrast to those who prefer to be deliberately vague, which then leads to more speculation,” the finance chief said.
Earlier, President Marcos also gave remarks on monetary policy.
“We may have to defend the peso in the coming months, but the overall forecast is that we are still doing better than other countries in terms of inflation, though economic developments are still anticipated,” President Marcos said via Twitter.
So far, the BSP raised key policy rates by 225 basis points this year to combat the skyrocketing consumer prices and tame the peso's weakness. The central bank has two more policy meetings left this year.
Under the Marcos administration’s medium-term macroeconomic assumptions, peso-dollar exchange rate was set at 51 to 53 for 2022 and 51 to 55 from 2023 to 2028.
The peso is currently among worst-performing currencies in Southeast Asia this year after losing more than 13 percent against the greenback.
Last week, BSP Governor Felipe M. Medalla said the central bank has enough toolkits to prevent speculative trading and defend the local currency from undue exchange rate fluctuations.
Medalla also vowed to be more vigorous in monitoring the spot market.
But at this time, he believes the BSP has no need to introduce new and additional foreign exchange rules to curb speculative activities as the spot market continue to hit the P59-level since Sept. 30.
“It’s part of what we can do but with more intensity,” Medalla said when asked if the BSP is seeing an alarming rate of speculative attacks against the peso.
To avoid “extreme” and substantial changes in the exchange rate, the BSP intervenes in the spot market to strengthen the peso by releasing US dollar liquidity.
The central bank regularly withdraws from the country’s foreign exchange reserves or the gross international reserves (GIR) to do this.
Since January this year, the GIR has lost $14.69 billion or from $107.69 billion to $93 billion as of end-September.
Medalla reiterated that exchange rate intervention and raising BSP policy rates are two primary monetary policy measures that they are undertaking to stabilize the peso-US dollar rates.