Jose Teodoro Limcaoco
The Bangko Sentral ng Pilipinas (BSP) will likely opt for a quarter-point interest rate cut at its policy meeting next week, Bank of the Philippine Islands (BPI) said, adding that the current global easing cycle may increase demand for risky asset classes as investors chase higher yield.
“I think there’s a strong possibility the Monetary Board (MB) will cut rates,” Jose Teodoro Limcaoco, BPI president and CEO, told reporters on the sidelines of the media launch of BPI Private Wealth Signature Yacht Race Series on Thursday night.
“But like most economists think, it will be a 25-basis point (bp) cut,” Limcaoco added.
The policymaking MB will meet on Oct. 16 to decide whether it will slam the brakes or cut the benchmark rate again.
Unlike in the United States where a slowing job market had prompted the US Federal Reserve to deliver an outsized 50-bp cut in September, the BSP entered its easing era in August with the typical quarter-point policy rate reduction to 6.25 percent.
Governor Eli Remolona Jr. had hinted at additional loosening of monetary policy at the last two meetings of the MB for 2024, with the BSP chief recently saying that the key rate could fall further to 4.5 percent by the end of 2025.
Risk-on sentiment
In a separate interview, Maria Theresa Marcial, president and CEO of BPI Wealth, the asset management unit of the Ayala-led lender, said falling interest rates could stimulate investor demand for longer-dated bonds and equities at home and abroad.
“As early as last year, we have been advocating for clients to start investing in risky assets because we’re saying that inflation has peaked and interest rates will go down,” Marcial said.
“I think there [are] still more legs for markets to rally. I think portfolio managers are just beginning to add equity risks, specifically Philippines,” she added.
That risk-on sentiment, in turn, could help BPI Wealth attract more clients. Marcial said the company was seeing net inflows of investment funds so far this year following a “flattish” performance in 2023.
As of end-2023, BPI Wealth’s assets under management (AUM) reached P1.22 trillion, a 40-percent surge from 2022.
For this year, Marcial said the company is aiming for a 20-percent year-on-year growth for its AUM, while working on its ambitious goal to grow those assets under its care to P3 trillion by 2026.
“In 2022, we saw net redemptions because of unfavorable market conditions. But 2023 was flattish. But 2024, we’re seeing more inflows happening,” she said.