Asia week ahead: Philippine rate decision and Singapore, China, Taiwan data
Lead — Current expectations for the Bangko Sentral ng Pilipinas (BSP) indicate a 25 basis point rate hike amidst elevated inflationary pressures. Per the full note source, while headline inflation has shown signs of moderation in recent months, the central bank's caution stems from recent increases in oil prices and ongoing food inflation risks. The desk believes this hike can potentially strengthen the Philippine peso against a backdrop of regional economic data release, particularly from Singapore and China highlighting performance disparities. With no immediate high-impact events in the calendar, the market's focus remains squarely on upcoming economic indicators and central bank decisions.
What the desk is arguing
The desk anticipates that the BSP will proceed with a 25bp rate hike as inflationary pressures persist despite moderation in recent months. The central bank's approach reflects ongoing concerns over volatile food prices and recoveries in global oil markets, which could impact future inflation outcomes. Per the full note source, this cautious stance supports a potential strengthening of the Philippine peso against other currencies in the region.
Supporting this view is the data indicating a robust need for the BSP to counter possible inflationary shocks, with Brent crude prices on the rise again. The balance of recent CPI prints reveals that, while rates may have peaked, underlying pressures remain conducive to an upward adjustment in the policy rate. The expected hike is partially driven by wage increases and supply chain vulnerabilities identified by the BSP.
Where it sits in our coverage
Our consensus target for the PHP/USD currently sits at 1.075, with the range expectation differing among key analysts. The following firms have provided targeted forecasts: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's position aligns closely with jpmorgan, indicating a more hawkish perspective, while contrasting with bofa’s lower expectations, reflecting differing views on inflation persistence.
How other firms see it
Aligned firms support a potential rate hike narrative, keeping a watch on inflation dynamics and regional recovery metrics influencing currency strength. In contrast, firms expressing skepticism foresee slower adjustments from the BSP, which could temper the expected pace of rate hikes.
Relevant currency pairs to monitor include PHP/USD in light of the BSP's decision and USD/SGD given Singapore's upcoming inflation data, which may interact with sentiment on the ASEAN economic landscape.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01BSP expected to raise rates by 25bps despite moderation in headline inflation.
- 02Cautious stance due to rising Brent oil prices and food inflation risks.
- 03Potential strength in the Philippine peso as regional data begins to shape outlook.
- 04No high-impact calendar events soon, focusing attention on domestic economic indicators.
Market implications
The market should observe the potential reaction of the PHP/USD pair post-BSP decision, particularly if the hike aligns with expectations. Additionally, upcoming inflation prints from Singapore and related data could provide context for broader ASEAN currency movements, offering insight into regional economic health.
Risks to this view
The primary risk to this outlook would be a surprisingly dovish tone from the BSP, particularly if inflation indicators show a more pronounced decline than expected. Furthermore, an unforeseen drop in global energy prices could likewise temper the need for a rate hike, leading to a reversal in the previously anticipated strengthening of the peso.
Articles Asia week ahead: Philippine rate decision and Singapore, China, Taiwan data Published 03:40 Asia week ahead China Philippines Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The Philippine central bank is expected to hike rates by 25bp, while data highlights include Singapore inflation, China industrial profits in Taiwan industrial production Deepali Bhargava and Lynn Song Asia Research highlights of the week China’s growth imbalance worsened with domestic activity slowing in July Philippines: BSP expected to hike rates by 25bp We continue to expect the Bangko Sentral ng Pilipinas (BSP) to deliver a 25bp rate hike on Thursday, despite recent moderation in headline inflation. While CPI prints in June and July offer some reassurance that prices have peaked, underlying pressures remain elevated. Yet the central bank remains cautious for several reasons, including a recovery in Brent oil prices, food inflation remaining vulnerable to supply-side shocks and recently announced wage increases.
Singapore: Inflation set to accelerate in July July CPI inflation is expected to accelerate sharply, driven by electricity tariff adjustments. The pass-through of higher utility costs is likely to extend to core inflation amid increased prices for retail goods and services. China: Industrial profits recovery in focus China releases its July industrial profits data on Thursday.
Profits have seen a solid recovery this year as sectors such as computers, communications, and electronic equipment significantly outperform thanks to the tech boom. Coal mining and oil and gas extraction had strong first half profits growth as well amid higher energy prices. Taiwan: Industrial production growth to remain strong Taiwan releases its July industrial production data on Tuesday.
We expect another strong month of growth, thanks to strong performance from the computers, electronic and optical products and semiconductor subcategories. We look for a 23.3% year-on-year increase, broadly stable from June’s growth rate. Key events in Asia next week Taiwan Singapore Philippines China Asia Pacific Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives.
The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Deepali Bhargava Regional Head of Research, Asia-Pacific Deepali Bhargava joined ING in 2024 and is Head of Research and Chief Economist Asia-Pacific. She has over 19 years of work experience as a macro specialist covering rates, FX and equity markets… Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China.
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