Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla said the BSP has done all it could to bring back the inflation rate to within the target range of two percent to four percent by end-2023. Medalla told CNBC recently that since they have acted “very agressively” in tightening monetary policy with a 425 basis points (bps) cumulative rate hikes since May 2022, they are more confident of the impact of the monetary tools utilized to reduce price pressures to allow a gradual lowering of the inflation rate until it reached below four percent by November or December this year. “We think that we have done almost enough but we’re waiting for one or two more good data points on the inflation,” he said on March 24. Medalla also expressed confidence that the previous threat of inflation expectations being disanchored is now lesser than it used to be when the peso was fast depreciating vis-à-vis the US dollar in June to October 2022. “We’re beginning to see signs that inflation forecasts are moving closer and closer to our own forecasts. We’re beginning to see that already. This is the advantage for us in being proactive on the policy rate,” said Medalla. To ensure inflation rate will be within the government target range by end-2023, the BSP again raised the benchmark overnight rate by 25 bps on March 23 to 6.25 percent. It also adjusted lower its average rate forecast for inflation to six percent from 6.1 percent (Feb. 16 monetary policy meeting), while for 2024, the projection is now 2.9 percent, also lower from the previous 3.1 percent. Meanwhile, Medalla said he is not worried if the peso-US dollar spot market has some volatility. For some months, the peso has been trading between P54 to P55. “We make sure people get used to volatility so that’s why we allowed the exchange rate to be a shock absorber. We all know the exchange rate can overshoot and this is where our reserves come in handy. If we think that it’s overshooting, then that’s the time we sell. And fortunately, that’s strategy is not only good, it’s profitable for us because all our debts are in pesos and all our assets are in foreign exchange,” said Medalla. On the sidelines of a Chamber of Thrift Banks (CTB) last Friday, Medalla said there are pros and cons of a weaker peso, one of these is that imported goods are priced on the high side when the US dollar is strong. The effect is that the consuming public will buy locally-produced products. Another positive factor is that a weaker peso will also discourage smuggling. “That’s why letting the peso adjust to reflect market fundamental is a good idea,” said the BSP chief. Medalla said for now, the BSP can wholly focus on managing inflation. “People do realize that much of the inflation is due to import restrictions on food. We’re now quite confident after the government formed an anti-inflation task force,” he said, referring to the Inter-agency Committee on Inflation and Market Outlook. “The very focus of that group is prevent surprise shortages in food and agricultural products from adding to inflation, to reduce their contribution to inflation,” he added.