BSP raises policy rate by 50 basis points
The Bangko Sentral ng Pilipinas (BSP) [source], our central bank and rough equivalent of the US Federal Reserve (US Fed), met yesterday and decided to raise the benchmark rate by 50 basis points to 4.25%.
This rate is used by banks to set the price for renting money (loan interest rates), and should (in theory) impact everything from savings deposit rates to mortgage rates.
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The BSP might be aggressive relative to its own history, but this the second meeting cycle in a row where the US Fed came out with a strong raise and the BSP failed to keep pace.
The peso has melted in value relative to the US Dollar, in part because of this difference, and it will (probably?) continue to melt because of the BSP’s approach.
The US Fed basically signaled that the 75 bp raises will continue until inflation looks controllable, but the BSP seems far less guided by any clear metric.
Peso weakness will probably get worse before it gets better.
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