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Peso Firms After BSP Hikes Rates By 75bp, Medalla Vows Determination To Contain Inflation

PHP

Bangko Sentral ng Pilipinas delivered the expected 75bp rate hike Thursday, which was preannounced well ahead of the meeting. The 2022 inflation projection was raised to +5.8% Y/Y from +5.6% at the September monetary policy review, with the 2023 forecast raised to +4.3% from +4.1%.

  • BSP Gov Medalla told CNBC today that the central bank is "beginning to see" a strong USD disanchoring inflation expectations. He added that the BSP is "a lot more concerned about the exchange rate now than normal." A U.S./Philippines policy rate difference of more than 100bp could lead to the overdepreciation of the Philippine peso.
  • In a further round of comments, Medalla noted that the central bank intervenes "in the FX market a lot more than normal nowadays," adding that the economy is strong enough to withstand more rate hikes as the goal is to bring inflation into the target range by 2H2023.
  • Foreign investors were net sellers of £21.49mn in Philippine stocks Thursday. The PSEi index traded clawed back its initial losses, extending the upward move today, adding 0.36% versus Thursday's close.
  • Spot USD/PHP trades -0.017 at PHP57.353. Bears look for losses past the 100-DMA at PHP57.024, with the PHP59 all-time high providing near-term resistance. USD/PHP 1-month NDF last -0.11 at PHP57.37, with bears eyeing the 100-DMA at PHP57.267 for initial support and bulls taking aim at Nov 3 high of PHP59.05.
  • The Philippines' overall balance of payments for October is expected to be released later today.
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Bangko Sentral ng Pilipinas delivered the expected 75bp rate hike Thursday, which was preannounced well ahead of the meeting. The 2022 inflation projection was raised to +5.8% Y/Y from +5.6% at the September monetary policy review, with the 2023 forecast raised to +4.3% from +4.1%.

  • BSP Gov Medalla told CNBC today that the central bank is "beginning to see" a strong USD disanchoring inflation expectations. He added that the BSP is "a lot more concerned about the exchange rate now than normal." A U.S./Philippines policy rate difference of more than 100bp could lead to the overdepreciation of the Philippine peso.
  • In a further round of comments, Medalla noted that the central bank intervenes "in the FX market a lot more than normal nowadays," adding that the economy is strong enough to withstand more rate hikes as the goal is to bring inflation into the target range by 2H2023.
  • Foreign investors were net sellers of £21.49mn in Philippine stocks Thursday. The PSEi index traded clawed back its initial losses, extending the upward move today, adding 0.36% versus Thursday's close.
  • Spot USD/PHP trades -0.017 at PHP57.353. Bears look for losses past the 100-DMA at PHP57.024, with the PHP59 all-time high providing near-term resistance. USD/PHP 1-month NDF last -0.11 at PHP57.37, with bears eyeing the 100-DMA at PHP57.267 for initial support and bulls taking aim at Nov 3 high of PHP59.05.
  • The Philippines' overall balance of payments for October is expected to be released later today.