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At the crossroads


Fil C. Sionil

Fil C. Sionil

“Standing at the crossroads, trying to read the signs
Tell me which way I should go to find the answer”

These are the first two lines in the first verse of the song “Let It Grow” written and popularized way back in 1974 by Eric Clapton in his album 461 Ocean Boulevard. As in the last song syndrome, it keeps playing on my mind as I watched the local currency’s persistent weakness.

The peso is under extreme pressure due to a series of events. The restlessness of the currency is caused by, among them, the dreaded ugly head of inflation, the unrelenting pull-out of hot money; the slowdown in the dollar remittances of overseas Filipino workers, particularly in the Middle East with their repatriation; the strengthening of the green. On Wednesday, which marks the 21st year of the Asian Financial Crisis, the peso again receded in value despite the “assistance” from the authorities to hold back further dip. Without the support, it could have depreciated further.

Not helping any are the developments in the political scene, the proposed change to federalism and the decision of the Land Transportation Franchising and Regulatory Board to increase by P1 the jeepney fare that may further fan inflation as it will trickle down to the cost in the delivery of basic goods and commodities.

All the signs indicate the peso is under extreme pressure. It’s at the crossroads as everybody awaits action – possibly another round of policy rate hike – from the authorities to calm the market. The common view is that the local currency’s weakness is likely to persist until inflation concerns are contained and rate hikes defined. The market is moving but the response of the Bangko Sentral ng Pilipijnas (BSP) is not real time.

East West Bank Vice Chair Antonio Moncupa concurred. “Low level of absolute interest rates also mean that rates could be adjusted to stem inflation threat without much throttling down growth.” Put another way, interest rate adjustments could be made and still, the resulting levels is still not that high to precipitate systemic credit defaults, serious investment slowdown and demand atrophy. Though, many believe that while there will be some effects on demand, it would be at manageable levels and still compatible with sustainable growth.

Between now and the next policy rate meeting of the authorities on August 9, the situation is creating angst and major deterrence, limiting the peso recovery. Industry insiders tell me BSP has asked a “select” group of market analysts and players to get their feel. The dialogue was originally scheduled last week but was postponed to the end of this month. Should this meeting push through, it will be the first time BSP Governor Nestor A. Espenilla will be exchanging ideas with the group since he assumed the position a year ago.

This brings me back to Verse 3 of Clapton’s “Let It Grow” song, which to my mind aptly describes the situation: “Time is getting shorter and there’s much for you to do. Only ask and you will get what you are needing. The rest is up to you…”

Heard from the airwaves: Guess who is this ranking Palace official who has neither confirmed or deny he’s running for an electoral post but already has an infomercial aired in DZRJ using the chorus of a song popularized by the Hotdog Band on the early ‘70s. I commend his researchers not only because the song is catchy but, more importantly, captures his pet name as well as surmane. He also has posters and tarpaulins plastered in strategic places in the metropolis. One is displayed at the LRT Taft Avenue-Buendia station.

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