Bangko Sentral Raises Policy Rate By 50bp, Tweaks Inflation Outlook

Bangko Sentral ng Pilipinas increased its policy rate by 50bp, mimicking a move delivered by the Fed yesterday, as expected by virtually all analysts. This was the seventh consecutive rate hike by the Philippine central bank, with the benchmark rate brought to a 14-year high of 5.5%.

• The BSP maintained its inflation forecast for this year to +5.8% Y/Y, raised the 2023 projection to +4.5% Y/Y from +4.3% and lowered the 2024 estimate to ++2.8% Y/Y from +3.1%, which means price growth will breach the +2.0-4.0% target this year and next. The balance of risk to this outlook remains skewed to the upside.
• Governor Medalla underscored the BSP's "steadfast" commitment to bringing inflation under control and opened the door for further rate hikes. He said there's a "low probability" that the tightening cycle has reached its peak and refused to rule out more action next year.
• USD/PHP 1-month NDF have shown little reaction to the BSP's rate decision and last trade +0.14 at PHP55.69, hovering above support from its 200-DMA. Onshore markets are closed, after the Philippine peso was the best performer in Asia EM space Thursday.