Sell-Side Views On BSP, More Hikes Coming

Sell-side analysts expect more BSP hikes, another 50bps could be delivered in March

Barclays: "The BSP hiked by 50bp, higher than our 25bp forecast. The Governor remained hawkish in the press conference, and the bank raised its inflation forecasts significantly. Combined, these actions suggest to us that two more 25bp hikes are likely in March and May. However, we assign a low probability to another 50bp hike at the next meeting. The Governor was explicit today that his personal view was for two 25bp hikes and it was the January surprise in inflation that drove the 50bp hike. The BSP's forecast of 6.1% inflation this year seems high to us; based on this forecast trajectory, we think inflation is unlikely to surprise to the upside again. This limits the need for another 50bp hike at the next meeting, in our view. With the Federal Reserve having lowered its hiking pace to 25bp, we think it is unlikely that the BSP will continue hiking by a larger increment."

Goldman Sachs: "Overall, in our view, the tone of the meeting statement, policymaker comments in the Q&A session and big upward revision to the 2023 headline inflation forecast, suggest a renewed inflation focus by the Monetary Board. We now forecast another 50bp policy rate hike at the March 23rd meeting (vs. a 25bp policy rate hike earlier). This raises our terminal rate forecast to 6.5% (from 6.25%, previously). Should food supply shocks persist, and inflation surprise to the upside again in coming months, we view risks as skewed towards additional policy rate hikes beyond the March MPC meeting."

J.P. Morgan: "All told, today’s monetary policy action affirms BSP’s unwavering and proactive commitment to deliver on its price stability mandate. While the central bank’s risk assessment around the inflation outlook for this year remains unchanged (i.e. to the upside), the BSP now regards the balance of risks to inflation for 2024 to also be tilted to the upside from “broadly balanced” at the December’s meeting. We had noted that there is a risk of more monetary policy tightening in March and this was affirmed by the tone from today’s meeting. Thus, we now pencil in a further 25bp hike next month, bringing the terminal rate to 6.25%. The February CPI report will be key in either maintaining our view for a 25bp hike or a revision to our call to a larger policy rate hike (+50bp), the latter premised on a repeat of a material upside surprise in the CPI print."