The latest batch of inflation readings and stable currency support our view for an extended interest rate pause by BSP until year-end. Real interest rates have turned positive for the second consecutive month and core inflation eased for a third straight month, further reflecting the lagged effects of past rate hikes.

While exercising caution in its response to the Fed’s latest hawkish remarks, BSP will likely prioritize on domestic growth momentum and inflation expectations against a narrowing interest-rate differential with US rates at this juncture.