Rate cut prospects thrill PH investors

The Philippine Stock Exchange index (PSEi) is poised to move higher after bulls took control the past week, pushing up the benchmark measure by nearly 4 percent to 6,410.48 on the improving outlook for inflation and interest rates.

“[T]he Federal Reserve signaled interest rate cuts next year, reigniting a bullish pulse among investors as interest rates may have peaked,” Jonathan Ravelas, stock market veteran and senior adviser at Reyes Tacandong & Co., said in a note to investors last week.

Ravelas said the bulls would need to hold the 6,300 level for the PSEi to see continued upside.

“Bear in mind that the [Bangko Sentral ng Pilipinas or BSP] kept its key rate steady and kept a tightening bias as upside risks to inflation remains,” he added.

Last week, the Monetary Board kept the policy rate steady at 6.5 percent. The BSP noted, however, that rates would stay higher for longer due to upside risks to inflation. “The possibility of rate cuts next year has gone up given recent developments, but this doesn’t necessarily mean that interest rates will be back to where they were in the past 15 years,” Bank of the Philippine Islands (BPI) said.

“The global economy has changed in the past three years and there are now more factors driving inflation. The era of ultra-low interest rates is most likely over,” it added.

The BPI also noted the US Federal Reserve signaled rate cuts of up to 75 basis points in 2024.

“We also expect the same magnitude for the BSP’s rate cuts next year if the central bank decides to do so,” the bank said. INQ