Peso Digests BSP's MonPol Decision, Inflation Outlook In Focus

Bangko Sentral ng Pilipinas left its benchmark interest rate at the record low of 2.0% yesterday and said they are monitoring inflation dynamics, following the recent uptick in CPI driven by supply-side factors. Spot USD/PHP has digested the decision and last trades flat at PHP48.579.

• BSP raised its inflation forecasts for 2021 and 2022 to +4.2% Y/Y from +4.0% and to +2.5% Y/Y from +2.7% respectively. Gov Diokno said that the central bank will be vigilant for any signs of inflation becoming broad-based, but at the moment price growth is expected to return to the target range of +2.0-4.0% Y/Y.
• The World Bank said that the Philippines' economic recovery will lag other countries in the region, owing to a series of policy missteps. The institution criticised the Philippines' "draconian" but "porous" lockdowns, largely inefficient stimulus measures and a "highly decentralised" public health system.
• From the technical perspective, the 200-DMA at PHP48.673 continues to provide a key bullish target. A break above there would open up Feb 23 high of PHP48.755. Bears look for a dip through Mar 23 low of PHP48.550, which would bring Mar 12 low of PHP48.370 into play.
• Philippine overall BoP should hit the wires at some point today. Next week's highlights include budget balance (Monday) & bank lending/money supply (Wednsday).