Peso Moves Away From Cycle Highs After Medalla Signals Rate Hikes About To End

The Philippine peso wiped out its earlier losses in reaction to comments from BSP Governor Medalla, who signalled an imminent end to the country's rate-hike cycle.

• Medalla stated that "the most likely scenario is that the last increase is the March meeting," adding that analysts are "most likely right" in predicting a peak rate of 6% versus the current 5.5%.
• The BSP has been among the most aggressively hawkish central banks in emerging Asia, raising its key policy rate well above pre-pandemic levels over the course of last year in a bid to contain inflation and shore up the currency.
• According to Medalla, the BSP is looking to trim the RRR by 200bp from the current 12% once the rate-hike cycle is completed, likely before the mid-year.
• He added that the BSP will give the peso "some room to appreciate, but we will buy opportunistically," adding that excessive PHP strengthening is bad for the economy.
• Spot USD/PHP trades -0.025 at PHP54.615, with Medalla's comments helping the rate tick away from new multi-month lows.