The Philippines is considering reducing its US Treasury holdings following Moody’s downgrade of the United States. Eli Remolona from BSP acknowledged the ongoing review of provided reserves while seeing Treasuries as highly liquid.
Eli Remolona mentioned that the BSP might cut interest rates by 75 basis points this year if inflation continues to decrease. The peso’s strength against the dollar allows for possible rate adjustments without stoking inflation concerns.
The downgrade has prompted discussions within BSP for diversification of reserves, which currently consist of 80% dollar-denominated assets. Discussions indicate the dollar’s dominance may weaken over time, necessitating a reassessment of current strategies.
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