Rate hike,

“The US still got a macroeconomy that’s extremely robust,” Mr. Carnell said. “My guess is that we find that the landing is softer and that we need to push back the easing.”

Mr. Mapa noted that if the US Fed starts cutting interest rates by May, the BSP could follow suit by June if local inflation is still within the 2-4% target.

Inflation eased to the lowest in three years to 2.8% in January from 3.9% in December and 8.7% a year ago. It was the second straight month that inflation was within the BSP’s 2-4% target.

Last week, the BSP lowered its risk-adjusted inflation forecast for this year to 3.9% from 4.2% but raised its outlook for 2025 to 3.5% from 3.4%.

It also cut its baseline inflation forecast for this year to 3.6% from 3.7% but kept its projection for 2025 at 3.2%.

Moody’s Analytics said the BSP’s recent policy move was in line with expectations. “We expect rates to hold steady until cuts start from mid-2024,” it said in a separate report.

Mr. Carnell does not rule out the possibility of the Fed increasing rates further this year if US inflation unexpectedly picks up in the second half.

“Let’s suppose that the Fed has been very cautious and hasn’t eased already by that stage,” he said. “Could I perhaps imagine that maybe one last 25-bp hike is something that they need to deliver to properly pull inflation back down? It’s a difficult thought experiment to run but it’s not an impossible one.”

The BSP may also not be done with its hiking cycle if the Fed does deliver one more rate hike.

“If the Fed does hike rates, then there would be room for additional rate hikes,” Mr. Mapa said. “[But BSP] doesn’t have to respond right away. They have to gauge if there’s pressure in the spot market.”

The BSP will hold its next policy review on April 4.