The Philippine Peso Needs a More Hawkish Central Bank
- Peso underperforms Asian peers even after May rate increase
- Real policy rate deep in the negative as inflation quickens
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The Philippine currency and bond markets will need a more hawkish tone from the central bank this week to stem their losing streak, as investors fret over whether policymakers are softening their fight on inflation.
The peso is at a 12-year low against the dollar even after the May 10 rate increase as central bank officials appear to clash over the prospects of further tightening. Persistent weakness in the bond market, where yields are at seven-year highs, further signal skepticism about the effectiveness of last month’s rate hike in slowing inflation.