BSP underscores the importance of foreign exchange movement.
Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla emphasized that it needs to smoothen movements in the foreign exchange (FX) rate during the "The Asset 17th Philippine Summit" in Taguig City.
“You got to come in and reduce the volatility,” Medalla said as he highlighted that BSP's participation in the market centers on promoting FX rate stability and the country's broader financial stability.
The BSP consistently signals to the market its unwavering commitment to use the tools at its disposal to stabilize the exchange rate in order to fulfill its mandate of ensuring price stability.
"This underscores the importance of a credible central bank," he added.
The BSP's involvement in the FX market is limited by policy to contain significant changes in the exchange rate. The BSP does not target, avoid, or alter any peso level or currency trend.
It also stands ready to provide liquidity and ensure that legitimate demands for foreign currency are satisfied when warranted.
During the summit, the Governor expressed appreciation for the BSP's accumulation of Gross International Reserves (GIR) during the past decades.
The GIR remained strong at US$ 93 billion at the end of September 2022, providing an external liquidity buffer of 7.4 months' worth of imports of goods and payments for services. This exceeds three months’ worth of imports that the International Monetary Fund (IMF) suggests as a rule of thumb in reserve adequacy.
Under its expanded toolkit and in line with the central bank's price stability mandate, the BSP is now employing the reserves to sell dollars to help manage foreign exchange movements. Medalla explained that while the GIR now represents lower import cover compared with earlier months, BSP may tap other sources of dollars.
Medalla stressed that the GIR is supported by steady inflows of foreign exchange from Overseas Filipino remittances, business process outsourcing, and foreign direct investments.
"The tools that we can use for intervention are much larger than our reserves,” he cited.
Tags: #BSP, #ForeignExchange