USD/PHP: BSP hike overshadowed by Oil shock – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad reports that USD/PHP is trading just below its record high as higher crude Oil prices overshadow a hawkish Bangko Sentral ng Pilipinas (BSP) move. BSP raised rates by 25 bps to 4.50% and signaled further tightening ahead, projecting inflation above its 4.0% ceiling in 2026 and 2027, yet the Peso remains under pressure.

Peso weak despite hawkish BSP stance

"USD/PHP is up just shy of its March 30 record high at 63.8300 as higher crude oil prices outweigh the Philippines central bank (BSP) hawkish hike."

"BSP raised the policy rate 25bps to 4.50% because the “inflation outlook has deteriorated amid the ongoing conflict in the Middle East.” Roughly half the analysts polled by Bloomberg expected a hike, the rest penciled in no change."

"Today’s rate increase was the first one since October 2023, following an easing cycle that delivered 225bps of cuts in the past 20 months."

"Governor Eli Remolona noted that the decision to raise rates “wasn’t unanimous” but it was a “good consensus,” adding that a 50bps hike was also considered. Importantly, Remolona signaled more hikes are in the pipeline stressing that “once we start raising the policy rate, we’re likely to raise it again”. Indeed, BSP now projects average headline inflation to breach the 4.0% tolerance ceiling in both 2026 and 2027."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)