The BSP cut its target reverse repo rate (RRP) again last April 11 by another 25bps (0.25%) to 5.5% with interest rates on the overnight deposit and lending facilities also adjusted lower to 5.0% and 6.0%, respectively, which is in-line with our expectations. The BSP also announced that its risk-adjusted inflation forecasts for 2025-2026 were revised downward to 2.3% and 3.3%, respectively (from 3.5% and 3.7%); while keeping its 2027 forecast unchanged at 3.2%.<\/p>\n\n\n\n
The move was generally widely anticipated by the market given easing inflation and relatively more stable Philippine Peso (PHP).<\/p>\n\n\n\n
We also highlight that the implied Fed rate cuts for 2025E still point to three 25-bps reduction each in June, July and Sept (vs. 4 rate cuts just a week ago, as per CME FedWatch). The 90-day tariff pause could lead to amicable negotiations which is enough for the Fed to formalize its rate cut path for 2025, factoring in the risk of a US recession and elevated inflation. Also, it is worth pointing out that the BSP\u2019s new inflation forecasts are even lower than our downgraded inflation outlook at 2.5% for 2025E and 3.0% for 2026E.<\/p>\n\n\n\n
BSP remains dovish<\/strong><\/p>\n\n\n\n All in all, the BSP\u2019s tone remained dovish citing that a \u201cmore manageable inflation outlook and risks to growth\u201d has allowed a shift toward a more accommodative monetary policy stance.<\/p>\n\n\n\n We note that past rate cuts have led to the outperformance of Property and Banks. While the former may still be dragged by sector-specific risks (i.e. oversupply in resi and office), we think banks, specifically mid-sized ones could see potential upside on NIMs (i.e. driven by downward repricing on expensive wholesale funds).<\/p>\n\n\n\n Our top property pick remains ALI while our pecking order for the Banks remains\u2013BDO, MBT and SECB.<\/strong><\/p>\n\n\n\n