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Economy

Philippine central bank eyes emergency meeting to tame prices

Governor vows 'immediate strong action' to stem sliding peso and inflation

Bangko Sentral ng Pilipinas (Central Bank of the Philippines)  said it will take "immediate strong action" to fight against inflation and the weakening peso.   © Reuters

MANILA -- The Philippine central bank is considering to hold an extraordinary policy meeting this month to fight rising prices and the falling peso.

Gov. Nestor Espenilla of Bangko Sentral ng Pilipinas on Friday said the bank "will take immediate strong action" using its policy toolkit to respond to the emerging inflation threat. Follow-through actions, he said, will also address the volatile foreign exchange market.

Asked by the Nikkei Asian Review if the BSP will hold an extraordinary policy meeting ahead of its scheduled review on Sept. 27, the governor said: "That's an option. We'll see."

Inflation in the Philippines hit 6.4% last month, the highest point in almost a decade, as food and oil prices soared. And on Friday, the peso hovered close to 54 to the dollar level, its weakest in nearly 13 years.

Espenilla said the central bank has also reactivated its "currency rate risk protection program," a non-deliverable forward contract between the BSP and commercial banks. The reactivization came at the request of the banks clients, who want a foreign currency hedge against the foreign exchange market's volatility.

"In addition, the BSP will take all actions necessary to deal with speculative activity by market participants," Espenilla added.

The BSP has hiked its benchmark policy rate by 100 basis points since May, after keeping steady for nearly four years. In August, the bank raised the rate by 50 basis points, to 4%, its most aggressive monetary response in 10 years.

Rising consumer prices have taken a toll on the Philippine economy, which grew 6% in the second quarter, its slowest pace in three years.

Another headwind: Household spending, the economy's key driver, has slowed for two quarters in a row as rising costs and President Rodrigo Duterte's tax increase discouraged spending.

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