Inflation could rise faster if depreciation of peso unchecked: analyst


Posted at Jul 06 2022 03:28 PM | Updated as of Jul 06 2022 03:46 PM

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MANILA - Inflation could further heat up if the peso’s depreciation is not checked, an analyst warned a day after inflation soared to almost a 4-year high of 6.1 percent in June. 

Jun Neri, lead economist of BPI, also said the Bangko Sentral ng Pilipinas needs to step up interest rate hikes to help check the peso’s slide versus the dollar, and prevent the country’s gross international reserves from shrinking. 

He also said that hiking interest rates now will prevent even more painful rate hikes later. 

“If the rate hikes of the BSP are timed very well and carried out forcefully enough we don't have to have big rate hikes later on. If we don't delay then it should protect us from even bigger adjustments later on as long as we are able to preserve a good amount of our international reserves,” Neri told ANC’s Market Edge. 

He said that the Philippines has already shown that it can grow at a fast pace of over 6 percent even if the BSP’s policy rate was around 4 percent.

“It is really inflation that will hurt us,” Neri said. 

The weakening of the local currency meanwhile can make prices rise even faster, hurting consumers and businesses alike.

“A very rapid depreciation of your currency could make that worse, it can fan the flames of even higher inflation.”