While BSP Governor Eli Remolona maintained that the Philippines continue to be on an easing cycle, he also said that the Bangko Sentral ng Pilipinas (BSP) could take a pause in December depending on the data.<\/p>\n\n\n\n
Worth highlighting: (1) the Philippines should do well under Trump 2.0 (as it did during Trump 1.0) given that we have a more domestic-oriented economy which makes it less vulnerable to any changes in the US trade policy; and (2) recall our
review of how the Philippines market performed in the previous rate cut cycles \u2013 the market recovered by 2% within 3 months post-rate cut and by 10% by the 6th month. On average, the market continued to rise by 10% within 6-12 months after the initial rate cut as further cuts are priced in.<\/p>\n\n\n\n
Our view: the BSP will cut by another 25 bps (0.25%) next month. Take note that the next Monetary Board meeting is on 19th Dec. We highlight that the U.S. Fed has already cut by 75bps (0.75%) total vs. the 50 bps (0.50%) cut so far by the BSP and that local data still support another rate cut before end-2024.<\/p>\n\n\n\n
We believe these factors support our view: (1) the Fed is still likely to cut one more time before end-2024 (next FOMC on 18th Dec) as currently suggested by the Fed Funds Futures; (2) slower 3Q GDP growth means the economy could use more support from lower rates; and (3) the seasonally strong OFW remittance inflows plus high GIR level should provide support to the peso.<\/p>\n\n\n\n
Also, no less than the BSP Governor himself acknowledged that inflation would remain within its 2-4% target, which would warrant a continued easing.<\/p>\n\n\n\n