Bangko Sentral To Lower Interest Rates

Inflation fell to 7.1% in January 2009 down from 8% in December of 2008.  There appears to be a continued trend of slowing inflation.  The central bank of the Philippines, Bangko Sentral ng Pilipinas, seems to be signaling that Philippine Central Bankit will again cut interest rates during its March 5th rate setting meeting.  That is the same day that inflation figures for February will be released.

These rate cuts should help to keep the dollar steady against the peso.  While reduced Philippine inflation will tend to  increase the value of the peso, the interest rate cut will tend to lower the value of the peso and will likely offset any change in the value of the dollar to the peso.   As always, this is only one factor affecting the value of money.

It is a very unstable period, should the US congress fail to enact a stimulus plan before February 15, I think that could signal a stronger rise in the dollar that has already been occurring.  The dollar has been rising against most currencies since mid October of 2008.

There has been very little movement in the dollar to peso value since the beginning of December.  It was the most stable I’ve seen in the last two years.  The Philippine economy has gone through its strongest period ever in recent years.  This has cushioned the blow from the world wide recession.

However, the Philippines is not immune to the global economic downturn.  There have been major job cuts in the Philippines among chip makers.  FedEx just announced that it will close its Philippine hub sending more workers into unemployment.

I will continue to hope for a stronger dollar as it is a direct benefit to me, an American expat living in the Philippines but I don’t think that is likely.  Huge spending by the US Federal Government should increase the supply of money and thus lower the dollars value.

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Filed under: Expat Finances

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