Radar Report: A hawkish BSP aims to soften impact
The Bangko Sentral ng Pilipinas (BSP) finally announced a 25-basis point (bp) hike on October 26, 2023–its first policy move since March 2023 and amounts to 450 bps in cumulative rate increases since May 2022.
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The BSP delivered an off-cycle policy rate hike, citing recent supply shocks in food and fuel causing a surge in second round effects and threatening to keep inflation elevated.
The surprise hike did little to talk down the USD/PHP exchange rate, which has been retesting previous highs, but consistent hawkish rhetoric from the BSP could help cap the currency pair from breaching 57.00.
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An opportunity to add duration
We remain tactical and continue to be overweight duration following the sell-off in the peso government securities.