Philippine peso drops most in Asia as calls for rate cut build

THE Philippine peso fell the most in Asia as expectations for an interest-rate cut mounted following the release of weak economic growth data last week.

The peso lost as much as 0.7 per cent to 57.81 per dollar on Monday (May 13), compared with declines of about 0.2 per cent for the Indonesian rupiah and Malaysian ringgit. The losses brought the currency closer to the 58 level, which is seen as the latest line in the sand for the central bank to defend. 

The weakness comes ahead of a Thursday rate decision by Bangko Sentral ng Pilipinas. While most market watchers expect rates to be on hold that day as the central bank balances the need to support the currency while boosting growth, expectations are growing for an easing later this year. 

“Market is anticipating more dovish signals from the central bank in view of the rate-setting meeting this week,” said Michael Ricafort, chief economist at Rizal Commercial Banking in Manila. “A rate cut later this year is justified given that inflation pressure is receding, though there is a need to wait for the Federal Reserve to cut first.”

Governor Eli Remolona last month said monetary easing will more likely begin in the first quarter of 2025 and that the cuts won’t be “huge,” citing inflationary risks. 

The Philippine economy grew 5.7 per cent from a year earlier in the first quarter, trailing expectations for a 5.9 per cent expansion. Inflation came in below estimates in April, though the continued strain on food supply keeps prices under pressure.  BLOOMBERG