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BSP Sees Higher Inflation Path, Shifts Emphasis To Price Stability

PHP

Spot USD/PHP trades -0.015 at PHP50.325, with no material impact of yesterday's monetary policy decision delivered by BSP after domestic markets closed. Bears look for a fall through Sep 22 low of PHP50.085 towards Sep 16 low of PHP49.715, while bulls look to a move through yesterday's high of PHP50.431, which would open up Aug 19 high of PHP50.615.

  • USD/PHP 1-month NDF last seen +0.020 at PHP50.390. Bulls look for a jump above yesterday's high of PHP50.530, which would expose Aug 19 high of PHP50.760. Bears keep an eye on Sep 20 low of PHP49.820, followed by Sep 15/Aug 31 & Sep 1 lows of PHP49.730/49.720.
  • Bangko Sentral ng Pilipinas left interest rates unchanged on Thursday, keeping monetary policy settings accommodative to support economic recovery despite a spike in consumer prices. The central bank also admitted that "latest baseline forecasts indicate a higher inflation path over the policy horizon," which "reflects the impact of recent supply disruptions on food prices," noting that "the risks to the inflation outlook have tilted towards the upside for the remaining months of 2021." As per the updated forecasts, policymakers expect inflation to average at +4.4% Y/Y this year (vs. +4.1% forecast last month), above the +2.0%-4.0% target range, and warned that it may exceed +5.0% this month before easing later in the year.
  • It is worth taking note of a change in Bangko Sentral's language around their policy priorities outlined in the final paragraph of the statement. The central bank said that they "will continue to closely monitor evolving conditions for any threats to the inflation target," dropping a mention about risks to growth outlook from the phrase.
  • Elsewhere, the Philippine BoP surplus widened to $1.040bn in August from $642 recorded in July, reducing the YtD deficit to $253mn.
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