BSP holds rate steady at 6.25%<\/strong><\/p>\n\n\n\n In line with consensus estimates, the Bangko Sentral ng Pilipinas (BSP) Monetary Board held rates steady for the second meeting in a row as policymakers assess the impact of its previous rate hikes on the economy. Despite the pause, the BSP did not rule out the possibility of further rate hikes if any upside risks to inflation materialize. <\/p>\n\n\n\n This follows the Federal Reserve\u2019s \u201chawkish pause\u201d, where they held rates steady but indicated further rate hikes ahead. As for the possibility of rate cuts to support economic growth, BSP Governor Felipe Medalla said that he would like to see inflation below 4% for at least two months before he would consider cutting rates.<\/p>\n\n\n\n Inflation outlook tempered<\/strong><\/p>\n\n\n\n The BSP also lowered its 2023 inflation forecast from 5.5% to 5.4%, saying that baseline projections are indicating a gradual return of inflation to the target band of 2-4% over the policy horizon. However, the BSP also raised its 2024 inflation forecast from 2.8% to 2.9%.<\/p>\n\n\n\n Following the leader<\/strong><\/p>\n\n\n\n While Governor Medalla emphasized that the BSP will remain data-dependent and will not follow the Fed\u2019s moves blindly, we believe that the Philippine central bank will try to maintain a 1.0% rate differential between the BSP and Fed rates to protect the local currency. <\/p>\n\n\n\n With the onset of El Ni\u00f1o threatening agricultural output, and higher transportation costs from toll fee hikes and LRT fare hikes, the BSP could always justify another rate hike by pointing to \u201cpotential upside risks to inflation\u201d.<\/p>\n\n\n\n