Philippines: Central bank delivers aggressive response - ING
Joey Cuyegkeng, Senior Economist at ING, notes that the Philippine central bank (BSP) raised its policy rate by 50 basis points to 4% in a bid to bring inflation back to the target range of 2% to 4% by 2019.
Key Quotes
“BSP is not done with raising rates. Inflation has still yet to peak, as implied by BSP’s upward revision of this year’s and next year’s inflation forecasts to 4.9% (from 4.5%) and to 3.7% (from 3.3%), respectively.”
“With the peak of inflation still ahead, inflation expectations are unlikely to stabilise anytime soon. Further monetary tightening would be needed to ensure that such expectations become well-anchored.”
“BSP’s hawkish actions and bias also address weakness in the peso, which has contributed to inflationary pressures. PHP is the third-worst performer among Asian currencies so far this year.”
“We expect the hawkish stance to deliver needed support for the currency, which could still come under pressure not only from a widening trade and current account deficit but also from the tightening of other major central banks.”
“We expect another 25 basis point rate hike in 4Q and another 50 basis points in 2019.”
Author
Sandeep Kanihama
FXStreet Contributor
Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.
