Philippines: BSP hiked rates by 50 bps

Economist at UOB Group Loke Siew Ting reviews the latest BSP monetary policy meeting.

Key Takeaways

“Bangko Sentral ng Pilipinas (BSP) raised its overnight reverse repurchase (RRP) rate by 50bps to 6.00%, marking the eighth straight meeting of increases since May last year. It wasn’t a surprised move as we have highlighted in our Jan CPI report that both stronger-than-expected Jan inflation and 4Q22 GDP outturns have cemented the case for a more restrictive monetary policy setting. Cumulatively, BSP has tightened its monetary policy by 400bps, the most aggressive since 2000.”

“The Monetary Board (MB) judged a strong follow-through monetary policy response today (16 Feb) as necessary (i) to reduce the risk of a breach in the inflation target in 2024 after consumer price inflation is projected to hit an average 6.1% this year (which is an upward revision from BSP’s previous forecast of 4.5% in Dec 2022, UOB est: 6.0%); (ii) to prevent inflation expectations from drifting further away from the 2.0%-4.0% target band; and (iii) to contain demand-side pressures and second-round effects without unduly hindering the sustained momentum of economic growth.”

“We now expect BSP to jack up its RRP rate to 6.75% by the middle of this year (from a previous estimate of 6.00% by 1Q23). Our new BSP outlook is mainly to reflect an upward revision in inflation projection last week (7 Feb) for the Philippines this year and a revised timeline for US Fed rate to hit its peak in 2Q23. After that, we believe that a consistent gradual slowdown in inflation following the most aggressive interest rate hikes since last year and moderate growth prospects would allow BSP to take a long pause on its rate hikes in 2H23, keeping the RRP rate at 6.75% until year-end.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.