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Philippine peso lags peers after third straight BSP rate hike

The BSP lifted rates 25 bps to 5.00% while BBH said policy is still behind the curve as inflation remains above its tolerance band and negative real rates weigh on the peso.

Reported · Written up by our desk · Central Banks

Brown Brothers Harriman’s Elias Haddad expects the Philippine peso to continue underperforming other Asian currencies after the Bangko Sentral ng Pilipinas delivered a third consecutive 25 bps rate hike, taking its policy rate to 5.00%.

FXStreet reported that although the BSP characterized the move as preemptive, BBH argues policy remains behind the curve because inflation is still above the central bank’s tolerance band, markets are pricing further tightening, and negative real rates continue to pressure the PHP.

The analysis also ties the peso’s weakness to the broader pricing of additional monetary tightening, as real yields have not moved high enough to offset inflation, according to FXStreet’s account of BBH’s view.

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