The Bangko Sentral ng Pilipinas, or BSP, on Thursday said it is leaning toward a "less managed" foreign-exchange policy as recent inflation rates signal a downtrend. 

"We think interventions should only happen in times of stress," BSP Governor Eli Remolona said in a meeting of the Rotary Club of Manila in Manila Polo Club, Makati City.

Remolona said the central bank is developing a foreign-exchange intervention framework which involves comprehensive research on economies other than the United States.

"We're still doing our homework on that. We're looking at remittances and exports. One is also to look at our peers, which countries are in the same boat," he said.

Remolona cited the sharp peso depreciation in October 2022, following the policy rate hikes of the US Federal Reserve to slow US inflation. The peso hit P58.99 to a dollar or 15 percent decline at one point during that period as investors took advantage of US securities.

Weak currency affects prices

As a largely importing country, peso depreciation generally means more Filipinos pay higher for goods and services. On the other hand, Philippine exports become cheaper for foreign consumers.

"If interventions are about containing stress that means interventions should be infrequent. We should know what the narrative is," Remolona said.

These statements came after the BSP in September last year said it aims to keep the peso-dollar rate at P57 to $1 dollar as the local inflation quickened to 5.3 percent in August from 4.7 percent in July.

The BSP has raised its policy rate by 450 basis points to 6.5 percent to slow inflation within 2 to 4 percent. November inflation came close to its target at 4.1 percent, influencing its December forecast at 3.6 to 4.4 percent.

While the BSP waits for the latest inflation print, Remolona said he is confident the existing BSP policy rate remains "reasonable" to support economic growth.

"We think we will do better than just a soft landing. The test whether we fell behind or caught up is whether we managed a soft landing to get our inflation rates to the target without causing a recession or significant slowdown in growth," Remolona said.

"We will maintain reasonable growth rates. Europe is far behind the curve. Compared to other central banks, I think we're doing very well," he continued.