March Radar Report: Easing inflation pressures and softer global growth in the horizon
Central banks start to sound dovish ahead of a possible economic slowdown.
By EA Aguirre
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The Bangko Sentral ng Pilipinas (BSP) hiked policy rates by 25 basis points to 6.25%, citing easing inflation in February and a softer global growth outlook. We believe the BSP will pause here and then cut rates down to 6.00% in December.
USD/PHP once again trades below 55.00 as the top performing Asian currency year-to-date, but we question the sustainability of its outperformance. We reaffirm our year-end forecast of 55.10 as economic fundamentals result in greater domestic demand for USD.
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For peso investors, we see value in locking in 10 to 20-year government securities before the market chases after the peak in yields. We also see the lower USD/PHP as an opportunity to enter USD-denominated bonds, but we prefer staying in sovereign bonds due to the impact of Silicon Valley Bank and Credit Suisse on corporate credits.
EARL ANDREW “EA” AGUIRRE is a