Sell-Side Less Hawkish On BSP Outlook Post Yesterday's Downside CPI Surprise

Below provides an update from Goldman Sachs and J.P. Morgan post yesterday's downside CPI surprise. Both banks are forecasting an additional rate hike before year end, but see risks this doesn't eventuate.

• Goldman Sachs: "Today's reading was below the lower band of BSP's monthly inflation forecast range of 5.1% to 5.9%. Our current expectation is that the BSP could hike policy rates another 25bp by year-end due to recent minimum wage hikes, electricity tariff increases and another potential increase in transportation fares. However, the lower-than-expected inflation numbers for October and recent dollar weakness, skews risks to our forecast of another 25bp hike in dovish direction (i.e. BSP keeping policy rates on hold from here)."
• J.P. Morgan: "Inflation to stay above target through 1H24; Maintain BSP hike in November – Following today’s weaker-than-expected print, we revise lower our headline CPI forecasts from 6.4% to 6.1% in 2023 and from 5.3% to 4.6% in 2024, but still expect overall prices to stay above the 2%-4% target range through 1H24 (Figure 5). We still expect the BSP to follow up on the off-cycle hike on October 26 with another 25bp hike in November to anchor inflation expectations, although dovish remarks in policy-making circles may mean lower likelihood of additional tightening."