Peso weakness to compel BSP to hike rates anew — Capital Economics

The depreciation of the peso against the dollar will compel the Bangko Sentral ng Pilipinas (BSP) to raise policy rates anew in its upcoming monetary policy meeting next week, London-based think tank Capital Economics said.

"The continued weakness of the peso is a further reason why we think the BSP will opt for another 50 basis points hike at its next meeting on September 27," Capital Economics said in a report.

The local currency has been trading within the 54-to-a dollar level, it's weakest in almost 13 years due to the escalating trade tensions between US and China and concerns of skyrocketing commodity prices.

The peso has now weakened by almost 8 percent against the dollar since the start of the year, making it one of the worst performing Asian currencies, according to Capital Economics.

The rising inflation has compelled the central bank to raise interest rates thrice so far this year, for a total of 100 basis points.

"Currency weakness is a concern for the central bank, which is also grappling with soaring inflation," Capital Economics said.

The BSP has previously highlighted the risk to the outlook from 'excessive peso volatility' and stated that it is prepared to take necessary steps to combat it.

The central bank earlier warned against currency speculators and reactivated tools  aimed at easing demand pressures in the foreign exchange market.  — RSJ, GMA News