Peso slides after inflation report

The peso  weakened against the dollar on Wednesday as steady October inflation supported expectations of a December rate cut by the Bangko Sentral ng Pilipinas (BSP).

The local unit closed at PHP 58.83 per dollar, dropping by 31.5 centavos from its PHP 58.515 finish on Tuesday, Bankers Association of the Philippines data showed.

The peso opened Wednesday’s session weaker at PHP 58.65 against the greenback. Its intraday high was at PHP 58.63, while its worst showing was at PHP 58.85 versus the dollar.

Dollars traded rose to USD 1.44 billion from USD 1.33 billion on Tuesday.

“The dollar-peso closed higher as inflation data came short of expectations, supporting bets of another rate cut from the BSP come December,” a trader said in a phone interview.

Headline inflation stood at 1.7% in October, steady from the September clip but slowing from 2.3% in the same month a year ago.

This was a tad below the 1.8% median estimate in a BusinessWorld poll of 17 analysts and was within the BSP’s 1.4-2.2% forecast for the month.

October was also the eighth straight month that the consumer price index was below the central bank’s annual 2-4% target.

For the first 10 months, inflation averaged 1.7%, matching the BSP’s full-year forecast.

Last month, the central bank trimmed benchmark interest rates by 25 basis points (bps) for a fourth consecutive meeting to bring the policy rate to 4.75%. The Monetary Board has now reduced borrowing costs by a total of 175 bps since it began its easing cycle in August 2024.

BSP Governor Eli M. Remolona, Jr. has said that one more cut is possible at their Dec. 11 meeting. He also left the door open for further easing until next year to help boost domestic demand due to a softer economic outlook as a widening corruption scandal involving government infrastructure projects has affected business sentiment.

The peso was also dragged lower by a stronger dollar amid increased risk aversion in global markets, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

For Thursday, the trader sees the peso moving between PHP 58.60 and PHP 59 per dollar, while Mr. Ricafort sees it ranging from PHP 58.70 to PHP 58.95. — A.M.C. Sy