J.P Morgan & Goldman Sachs On BSP

Both banks look for the BSP to remain on hold for the remainder of this year.

Goldman Sachs: "In the press release, the BSP noted that it "remains prepared to resume monetary tightening as necessary" depending on the evolution of price and financial stability risks. In the Q&A session, the MB reiterated that monetary policy will mostly be driven by domestic inflation trends although cautioned about risks from further Fed rate hikes. Asked about rate cuts, the governor noted that at the moment, keeping the rates unchanged is the appropriate move. He further elaborated that the error of cutting too soon is more serious than cutting too late and that cutting in the very near term is unlikely in his view.

Going forward, we expect BSP to keep its policy rate unchanged at 6.25% for the remainder of this year as inflation eases. We expect BSP to start cutting policy rates in H1 2024, when our US team forecasts the Fed to start loosening monetary policy settings. The next BSP meeting is scheduled on 17 August. Another event to watch for in coming days is a potential change in central bank leadership as the current Governor’s term ends on June 30."

J.P. Morgan: "Today, the slight downward revision in the BSP’s headline CPI forecast for 2023 to 5.4%y/y from 5.5% (6.0% at March MB meeting) speaks to a standing conviction by the central bank that headline CPI will move back into the target range by year-end, with core inflation to ease further in the coming months.

Barring upside CPI surprises, BSP to stand pat on policy rate this year. Barring any supply-side shocks that could illicit a sharp upward revision to CPI forecasts, we believe the BSP will remain on hold this year. Should inflation momentum ease more quickly than our projections, this raises the risk bias around monetary policy towards easing later this year."