Philippines: BSP seen on-hold for the current year – UOB

Pablo Piovano FXStreet

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting evaluate the latest monetary policy meeting by the Bangko Sentral ng Pilipinas (BSP).

Key Quotes

“As expected, Bangko Sentral ng Pilipinas (BSP) kept its overnight reverse repurchase (RRP) rate unchanged for the second straight meeting at 2.00% today (25 Mar). Accordingly, both the overnight deposit and lending rates were also left untouched at 1.50% and 2.50% respectively. It cited rising supply-driven inflation and lingering downside risks to the growth outlook as reasons suggesting that the prevailing monetary policy settings remain appropriate to facilitate the nation’s economic recovery.”

“Owing to the inflation outturn in Feb and elevated global oil prices, the central bank is now seeing headline inflation to breach the upper end of the target range of 2.0%-4.0% to average 4.2% this year (UOB forecast: 4.0%; 2020: 2.6%), with price pressures expected to taper off below 4.0% only in 4Q21 and towards the mid-point in 1Q22. Nonetheless, it ruled out the possibility of inflation overshooting the 5.0% level for the entire year of 2021 given uncertainties surrounding the pandemic and mass vaccination program.”

“That said, underlying inflation is presently seen muted given weak labour market conditions and nascent economic recovery. Although there is no evidence of any spillover effects of inflation at this juncture, BSP stressed that it will continue to be watchful for any signs of inflation becoming broader based to assess the need for appropriate monetary policy response.”

“Overall, the latest monetary policy statement is deemed neutral besides guarding against the build-up of demand price pressures that will eventually derail the nation’s economic revival, if any. This alongside the resurgence of COVID-19 infections lately in the country and potential delays in securing adequate vaccine doses suggest that the economic recovery still needs persistent policy support. Unless second round inflationary effects occur, BSP would remain on hold, in our view, keeping RRP rate at 2.00% until end-2021.”

Author

Pablo Piovano

FXStreet

Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.