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Philippines: BSP keeps rates unchanged in November – UOB

Julia Gohsenior economist at UOB Group, and Loke Siew Tingeconomist, analyze the BSP’s latest interest rate decision.

Key points

The Bangko Sentral ng Pilipinas (BSP) kept its overnight reverse repo rate (RRP) unchanged at 6.50%… after factoring in a sharp slowdown in inflation in October (details in the report). The decision was contrary to their own forecasts for a hike during last month’s off-cycle rate hike (October 26), and our expectations for a 25 basis point hike, but is in line with the Bloomberg consensus.

The monetary board considered that a pause in rates would allow previous interest rate adjustments to continue to affect the economy, particularly businesses and households, by further slowing credit growth. It also reflects a downgrading of the BSP’s inflation outlook, with risk-adjusted inflation forecasts (which were first introduced at the 26 October 2023 extra-cycle meeting) being adjusted downward to 6.1% for 2023 (from 6.2% expected in October), 4.4% for 2024 (from 4.7% previously) and 3.4% for 2025 (from 3.5% estimated in October).

In general, the latest monetary policy statement continued to sound aggressive. Likewise, official comments during the post-meeting briefing continued to suggest a meeting-by-meeting, data-dependent approach in the short term. Recognizing this and the extremely fluid global conditions, we see a 50:50 chance for the BSP to once again rise by 25 basis points at the next and final meeting of this year on December 14. Until we have another big positive surprise in the nation’s inflation report for November and/or the US Fed officially announces the end of its rate-hiking cycle next month, we maintain our forecast that the inflation rate RRP ends the year up at 6.75% for now.

Source: Fx Street

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