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MNI BSP Preview - February 2023: +50bps Likely, But A Close Call

  • The Bloomberg consensus for tomorrow’s BSP meeting sits at +50bps, which would take the policy rate to 6.00%. However, 11 out of 23 economists surveyed by Bloomberg expect only a +25bps move, with the remainder in the 50bps camp. So, whilst tighter policy is clearly expected, the market is close to being evenly split between a 25bps or 50bps outcome. Our bias rests with a 50bps hike, although it is clearly a close call.
  • The case for tighter policy once again remains straight forward and is centered on price pressures. The continued move higher in both headline and core inflation pressures is clear justification for further policy adjustments. The Jan CPI report blew market and BSP expectations out of the water. The other concern for the BSP may be inflation expectations becoming entrenched.
  • The case for going only 25bps rests with the cumulative impact of previous tightening. Since the BSP started raising rates, a cumulative 350bps of rate hikes has been delivered since March last year. BSP Governor Medalla has also stated that non-monetary policy measures need to be optimized to bring down inflation pressures. On balance though, we see the risks skewed towards a 50bps tightening given known inflation outcomes.
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