5G Investment News
  • Top News
  • Economy
  • Forex
  • Investing
  • Stock
  • Editor’s Pick
No Result
View All Result
5G Investment News
  • Top News
  • Economy
  • Forex
  • Investing
  • Stock
  • Editor’s Pick
No Result
View All Result
5G Investment News
No Result
View All Result
Home Stock

Fed cuts to bolster BSP easing cycle

by
August 25, 2024
in Stock
0
Fed cuts to bolster BSP easing cycle
People are seen in Divisoria in this file photo. — PHILIPPINE STAR/WALTER BOLLOZOS

By Luisa Maria Jacinta C. Jocson, Reporter

THE US Federal Reserve’s latest signals of policy easing may give the Bangko Sentral ng Pilipinas (BSP) more confidence to continue its own rate cut cycle, analysts said.

Jonathan L. Ravelas, senior adviser at professional service firm Reyes Tacandong & Co. said that the start of the Fed’s easing cycle would “open doors” for the BSP to continue cutting rates.

“If Philippine inflation continues to trend lower, a cut in December is likely,” Mr. Ravelas said in a Viber message.

Federal Reserve Chair Jerome H. Powell on Friday endorsed an imminent start to interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the US central bank’s 2% target, Reuters reported.

“The time has come for policy to adjust,” Mr. Powell said in a highly anticipated speech to the Kansas City Fed’s annual economic conference in Jackson Hole, Wyoming. “The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”

Analysts and financial markets anticipate the Fed to deliver its first rate cut at its Sept. 17-18 policy meeting, a view that was cemented after a readout of the central bank’s July meeting said a “vast majority” of policy makers agreed the policy easing likely would begin next month.

Leonardo A. Lanzona, an economics professor at the Ateneo de Manila University, said that Fed rate cuts have already been widely expected as US inflation has stabilized.

“The delay has resulted in a slowdown in the US economy. Thus, the BSP anticipated this eventual decline in rates and proceeded to reduce its policy rates before the Fed in order to avoid any negative effects on the Philippines,” he said in an e-mail.

“Considering these factors, the eventual decrease in Fed rates will no longer have any impact on the Philippine economy.”

The Monetary Board this month reduced the target reverse repurchase rate by 25 basis points (bps) to 6.25% from the over 17-year high of 6.5%.

Mr. Lanzona said that markets likely already took into account the Fed’s projected moves as the BSP had already cut ahead of the US central bank.

“Whatever its consequences it could have made were already incorporated into business decisions, and thus whatever we are experiencing now is going to continue since the lower rates have already been enforced by the BSP,” he said.

“While short-term investments might slightly be affected, the long-term investments are not going to change since the lower rates in both countries have already been rationally incorporated in their forecasts.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that local policy rates could fall to as low as 4-5% levels from next year through 2026 as the Fed begins cutting rates.

“Local interest rate benchmarks would go down further by another 50 or 100 basis points or even more from current levels from 2025 to 2026, as the Fed would cut rates by a total of about 225 bps from 2024 to 2026 (that could be matched locally by the BSP) based on the latest Fed dot plot,” he said.

BSP Governor Eli M. Remolona, Jr. has signaled the possibility of another 25-bp cut in the fourth quarter. The Monetary Board has two remaining rate-setting meetings this year, on Oct. 17 and Dec. 19.

Meanwhile, Mr. Lanzona noted that risks to the inflation outlook in the Philippines could pose a risk to the BSP’s policy reductions.

“The inflation here is fundamentally a supply-side phenomenon, and the policy rates are really not supposed to stop inflation but merely to eliminate inflationary expectations,” he said.

“Hence, because the government has not been able to effectively implement a strong productivity plan, especially in agriculture, inflation will remain a threat that can weaken the currency.”

The BSP sees headline inflation averaging 3.4% this year and 3.1% in 2025. Inflation accelerated to a nine-month high of 4.4% in July.

“Furthermore, the continued pump-priming of the government further adds on to the risks of inflation. This means that BSP’s reduction of interest rates is ill-advised,” Mr. Lanzona said.

He added that the BSP must continue monitoring the Fed rate to support the peso. “It should keep its rate very close, if not higher, than the Fed rates.”

Mr. Ricafort likewise said there must be a “healthy” interest rate differential to stabilize the exchange rate. 

The Fed funds rate is currently at the 5.25-5.5% range.

“Further cut in local policy rates are possible if the peso exchange rate is relatively stable or stronger, global crude oil prices still among 2.5-year lows, and if headline inflation remains within the BSP’s inflation target of 2-4% for the coming months,” Mr. Ricafort added.

The peso closed at P56.333 per dollar on Thursday, strengthening by 16.7 centavos from its P56.5 finish on Wednesday. The local currency was previously trading at the P57-58 level in the past few months. — with inputs from Reuters

Previous Post

PHL economy ‘will not lag far behind Vietnam’ — Moody’s Analytics

Next Post

England’s Consultant Industry Poised to Become a Leader in Compliant Gambling Advertisement

Next Post
England’s Consultant Industry Poised to Become a Leader in Compliant Gambling Advertisement

England’s Consultant Industry Poised to Become a Leader in Compliant Gambling Advertisement

Enter Your Information Below To Receive Free Trading Ideas, Latest News And Articles.







    Fill Out & Get More Relevant News





    Stay ahead of the market and unlock exclusive trading insights & timely news. We value your privacy - your information is secure, and you can unsubscribe anytime. Gain an edge with hand-picked trading opportunities, stay informed with market-moving updates, and learn from expert tips & strategies.
    Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

    Recommended

    Inflation inches up in June

    Inflation inches up in June

    July 4, 2025
    The Medical City sets standard for ER, bringing fastER Care in 4 hours

    The Medical City sets standard for ER, bringing fastER Care in 4 hours

    July 4, 2025
    Explore franchise businesses at Franchise Negosyo Para sa Region XI (Davao)

    Explore franchise businesses at Franchise Negosyo Para sa Region XI (Davao)

    July 4, 2025
    Wimbledon winners to pay up to £1.3m in tax as HMRC claims £17m from prize pot

    Wimbledon winners to pay up to £1.3m in tax as HMRC claims £17m from prize pot

    July 4, 2025

    Disclaimer: 5GInvestmentNews.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice.
    The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    • Privacy Policy
    • Terms & Conditions

    Copyright © 2024 5GInvestmentNews. All Rights Reserved.

    No Result
    View All Result
    • Home
    • Privacy Policy
    • suspicious engagement
    • Terms & Conditions
    • Thank you

    © 2025 JNews - Premium WordPress news & magazine theme by Jegtheme.