ING: Above Target Inflation To Keep BSP Hawkish

ING note that “inflation remains well above the Bangko Sentral ng Pilipinas’ (BSP) upper bound target of 4%, which should keep BSP hawkish in the coming months. BSP Governor, Medalla signalled that rate hikes are in the pipeline and we continue to pencil in a 50bp rate increase at the 18 August policy meeting. We expect BSP to hike rates for the rest of the year with the policy rate reaching 4.5% by year-end. The PHP should gain some support from policy tightening, but the PHP remains vulnerable to depreciation while inflation runs high and also as the Philippines now runs a current account deficit.”