Bangko Sentral ng Pilipinas Delivers 25bp Off-Cycle Rate Hike

Bangko Sentral ng Pilipinas announces its decision to raise the key interest rate by 25bp to 6.50% in an off-cycle move after Governor Eli Remolona earlier this week flagged the potential for such a pre-emptive step.

• The move came on the back of the BSP's assessment that upside risks to the price outlook continue to manifest, while second-round effects have broadened, calling for urgent monetary policy response.
• The BSP does not expect inflation to ease to the target already this year. It sees 2024 inflation at +4.7% Y/Y, above the +2.0%-4.0% Y/Y target range, albeit a return to the target is possible after July 2024.
• Governor Remolona noted that indicators are pointing to dissipating pent-up demand but growth prospects remain largely intact. Still, a global demand slowdown is currently weighing on domestic economic growth.
• The Governor judged that monetary policy will need to remain tighter for longer, while the central bank stands ready to deliver follow-through policy action. The Board will still have its regular meeting on November 16 and will take stock of new data.
• The BSP sticks with its hawkish bias, with Remolona noting that the central bank "fell a little bit behind in tightening" and will consider another hike at the November meeting if data warrant such a move.