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BSP considering off-cycle rate hike as early as tomorrow if inflation data looks ugly

The Governor of Bangko Sentral ng Pilipinas (BSP) [link], Eli Remolona, told reporters yesterday that worries of quickening inflation have put an off-cycle rate hike “on the table”. The Monetary Board isn’t scheduled to meet until November 16th, but Mr. Remolona said if “the data says inflation will go up very significantly” the Monetary Board “may go for an off-cycle hike as early as Thursday”, but that a potential hike could “also happen next week.”

MB BOTTOM-LINE: The Philippine Statistics Authority isn’t scheduled to release the CPI data for October until November 7, so I’m not exactly sure what data the BSP would be looking at that could trigger such an aggressive response. If the big concern is the USD/PHP exchange rate, then I’m even more confused because the rate has remained more or less stable in the ?56.5 to ?56.9 range since the beginning of August. Mr. Remolona said that he would defend the ?57/$1 psychological line, but a breach of that level doesn’t appear to be imminent so I’m not sure where the sudden rush to raise rates is coming from. Either way, the BSP appears to be grooming the market to expect a raise, basically at any time over the next three weeks. A rate hike would help support the Philippine Peso’s valuation relative to the dollar, and protect firms that have significant US dollar-denominated debts, but it would also push REIT yields higher and suppress REIT stock prices as a result.