Rate hike in the cards? Investors chew over Medalla clues

This week, investors will be weighing fresh comments made by Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla of a potential 50- or 75-basis point interest rate hike at the Monetary Board meeting this November as the Philippine Stock Exchange index nears the 6,000 “psychological” resistance level.

The benchmark measure ended the week at 5,904.75, up 0.15 percent from the previous session but lower by 0.46 percent for the week.

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., said the next key resistance levels were 6,000, then 6,194 to 6,235. Immediate support levels were 5,832 to 5,785.

Investors would be closely watching monetary authorities and inflation indicators for clues ahead of the next BSP rate-setting meeting on Nov. 17.

In a Bloomberg TV interview aired on Friday, Medalla justified the need for a more aggressive rate increase to address the weakening peso which “could add to inflation.”

“It’s a question of whether its 50 or 75 [basis points],” Medalla said. “The advantage of 75 is we probably will reduce the pressure on the peso and also reduce inflation but in 18 months or so.”

His comments aired a day after the US government reported that US inflation rose 8.2 percent in September, faster than the 8.1 percent forecast, stoking concerns the Federal Reserve would turn to more aggressive interest rate hikes.

The Fed’s next rate-setting meeting would be held on Nov. 2.

—Miguel R. Camus