BSP warns peso may weaken beyond gov't projections due to US Fed policy

The Bangko Sentral ng Pilipinas (BSP) warned that the peso-dollar exchange rate could exceed government projections for 2025 and 2026 due to a slower pace of monetary policy easing by the US Federal Reserve.

The Development Budget Coordination Committee expects the peso to trade at around P56-P58 per dollar this year and P55-P58 in 2026, but the BSP projects a slight deviation from these estimates.

On Wednesday, the US Fed held interest rates steady, with Chair Jerome H. Powell indicating no immediate plans for rate cuts until further data becomes available.

The peso weakened in October and November due to the strengthening of the US dollar after signals from the US Fed that policy rates would not be eased further.

Factors contributing to the recent currency weakness include concerns over inflationary impacts of President Donald J. Trump's economic policies, slower GDP growth, higher debt levels, and political uncertainty.

Despite these challenges, the BSP noted that sustained structural foreign exchange inflows from foreign direct investment, portfolio investments, and overseas Filipino remittances have partially mitigated the peso's depreciation.