The peso started the week on a negative note, weakening 0.3% after strengthening 1.5% the previous week, with expectations of a rate hike on August 18 supporting the losing currency. more than 8% during the first seven months of the year. .
The Bangko Sentral ng Pilipinas (BSP) is expected to continue its monetary tightening after an outsized 75 basis point (bp) rise in mid-July, although a similar move is not expected later this week.
BSP is set to follow its surprise July rate hike with a half-point hike on Thursday and another quarter-point hike next month to catch up with peers in containing soaring inflation, according to a Reuters poll.
Analysts at ING, DBS, OCBC and Mizuho Bank expect a 50 basis point hike in its main overnight borrowing rate to contain inflation which is near four-year highs.
“Headline inflation which has not yet peaked and continues to rise…is likely to keep policymakers resolute in their struggle to rein in mounting price pressures and ensure that inflation expectations inflation are not anchored,” DBS analysts said in a note.
BSP Governor Felipe Medalla told a forum on Wednesday that the central bank was “ready to take the necessary policy measures” to fight inflation, and added that current policy settings continued to support growth. economic.
The U.S. dollar index, which measures the greenback against six major peers, fell slightly ahead of U.S. central bank (Federal Reserve) minutes and U.S. retail sales for July.
“If the minutes indicate a larger shift to a data-dependent approach with more concerns about recession risks, markets may perceive the committee as less hawkish and the US dollar could decline further,” Maybank analysts wrote, based in Malaysia, in a note.