Signaling continuing pause?

PHILIPPINES - In Brief 15 Sep 2023 by Christine Tang

---

BSP Governor Eli Remolona told reporters yesterday that he does not see the need to hike policy rates based solely on the spike in prices last month. Markets took the Governor’s statement as a signal that the Monetary Board will leave policy rates untouched when it meets next week. This view likely takes into account also current expectations that the US Fed would keep rates on hold this month. Since the August inflation print that saw supply shocks push month-on-month inflation up by 1.1%, the peso has traded within a narrow band, above P56.50/$ but below P57/$. The price caps on rice remain in effect with economic managers lately supporting calls to reduce the tariff on imported rice from 35% to 0-10%. More data have come out this week suggesting weakening growth prospects. The July round of the Labor Force Survey (LFS) shows weaker labor market conditions compared with last year. Three noteworthy points are: A marked drop in the labor participation rate from 65% to 60%, equivalent to about 3 million workers who are no longer looking for work.[1] While the headline employment rate rose from 94.8% to 95.2% and the unemployment rate declined from 5.2% to 4.8%, there was a loss of about 2.8 million jobs yoy. Of those employed, there was an increase in the number of underemployed, specifically those who are already working 40 hours or more but still want more hours of work to augment incomes.[2] The underemployment rate rose from 14% to 16%, translating into over 7 million people who want to work more. [1] In a press release, the finance department said that “The Philippine Statistics Authority (PSA) attributed this decrease (in the labor force participation rate) to a s...