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MNI BSP Preview - September 2022: Further Tightening Needed To Tame Inflation

Bangko Sentral ng Pilipinas may raise the key policy rate by 50bp as core inflation is running hotter while the peso is refreshing record lows.

MNI Point of View:

  • We expect Bangko Sentral ng Pilipinas to raise the key policy rate by 50bp this week, moving it above pre-pandemic levels, as consumer price growth remains comfortably above the central bank’s tolerance band and the peso is trading at/near record lows.
  • While volatile food prices dragged headline inflation slightly lower in August, overall CPI growth remained comfortably above the target range. Meanwhile, the key measure of core prices quickened notably, breaking above the target range.
  • The peso has depreciated to record low levels versus the greenback in the recent weeks, raising the risk of accentuating already heightened price pressures. The local currency is set to continue to face headwinds as the Philippines keeps grappling with a "twin deficit."
  • Central bank rhetoric from over the past few weeks reflected a growing recognition of the pass-through from weaker exchange rate to inflation outturns and increasing readiness to take a more aggressive approach to monetary tightening.

Please use the following link to access the full preview: MNI BSP Preview September 2022.pdf

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MNI Point of View:

  • We expect Bangko Sentral ng Pilipinas to raise the key policy rate by 50bp this week, moving it above pre-pandemic levels, as consumer price growth remains comfortably above the central bank’s tolerance band and the peso is trading at/near record lows.
  • While volatile food prices dragged headline inflation slightly lower in August, overall CPI growth remained comfortably above the target range. Meanwhile, the key measure of core prices quickened notably, breaking above the target range.
  • The peso has depreciated to record low levels versus the greenback in the recent weeks, raising the risk of accentuating already heightened price pressures. The local currency is set to continue to face headwinds as the Philippines keeps grappling with a "twin deficit."
  • Central bank rhetoric from over the past few weeks reflected a growing recognition of the pass-through from weaker exchange rate to inflation outturns and increasing readiness to take a more aggressive approach to monetary tightening.

Please use the following link to access the full preview: MNI BSP Preview September 2022.pdf