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Inflation Update: Still low, still slow
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December
12
The Gist
A daily dose of market updates and smart investment strategies to guide your portfolio decisions
Today's Report
Your Morning Fix
- The Bangko Sentral ng Pilipinas reduced its benchmark policy rate by 25 basis points to 4.5%, the lowest since September 2022.
- The Asian Development Bank has approved a USD 500-million policy-based loan to the Philippines to support ocean-based economies and improve resilience of coastal areas.
- The Philippine Statistics Authority said the country’s domestic material extraction, covering biomass, metal ores, non-metallic minerals, and fossil fuels, rose 8.1% to 388.07 million metric tons in 2024.
- The US trade deficit narrowed by 10.9% month-on-month to USD 52.8 billion in September. Exports jumped 3.0% to USD 289.3 billion, outpacing a 0.6% rise in imports to USD 342.1 billion.
- The US Federal Reserve cut its policy rate by 25 basis points to 3.50%-3.75%, and signaled only one cut in 2026 as divisions persist over inflation, jobs, and the impact of Trump’s policies.
Our Portfolio Recommendation
Our peso portfolio is tilted slightly toward fixed income. While local inflation remains low and monetary easing is likely to continue, yields may be pushed higher by upcoming bond auctions. Continued rate cuts and rising consumer strength are also favorable for local equities, especially real estate and retail. The dollar portfolio is the reverse, with slightly lower fixed income owing to the uncertainty of the effects of tariffs on inflation. US Federal Reserve rate cuts are also closely watched. We remain positive on global equities, with a preference for US sectors, particularly technology, communication services, and financials.
| 2025 Metrobank Forecast | 2026 Metrobank Forecast | 2027 Metrobank Forecast | |
|---|---|---|---|
| GDP | 4.9% | 5.4% | 6.0% |
| Inflation | 1.8% | 3.3% | 3.0% |
| BSP Target Reverse Repurchase Rate | 4.50% | 4.00% | 4.00% |
| Federal Funds Rate | 3.75% | 2.75% | 2.75% |
| USD/PHP | 59.0 | 60.8 | 58.9 |
CHART OF THE DAY
Chart of the Day
BSP cuts rates by 25 basis points
The Bangko Sentral ng Pilipinas (BSP) reduced its policy rate by 25 basis points in its December 11 meeting, bringing the target reverse repurchase rate down to 4.50%. According to the BSP, the easing cycle is nearing its end, but it remains open to further rate cuts as may be warranted by incoming data. Sources: Bloomberg, BSP
Featured Reports
More Reads
USD/PHP closes lower amid rate cut decisions
- The USD/PHP exchange rate opened 9 centavos lower at 59.12 on Thursday, on broad dollar weakness after the US Federal Reserve cut rates by 25 basis points (bps) overnight.
- The pair initially consolidated between 59.09-59.13, but consistent offshore demand pushed the pair to the day’s high of 59.18.
- Light selling at 59.21 capped the early rally, and the pair later slid to 58.969 as dealers positioned ahead of the Bangko Sentral ng Pilipinas (BSP) decision and later reacted to the central bank’s unexpectedly hawkish tone.
- The USD/PHP exchange rate ultimately closed at 58.99, or 22 centavos lower day-on-day.
- The current support levels of USD/PHP are 58.80/90, while the resistance levels are 59.10/20.
READ MORE
Local GS market sees a reversal of trading flows
- The local government securities (GS) market saw initial strong buying interest on Thursday, after the US Federal Reserve’s rate cut and Governor Jerome Powell’s dovish comments.
- Fixed Rate Treasury Note (FXTN) 7-70 and FXTN 10-73 touched intraday lows of 5.500% and 5.860%, respectively.
- Meanwhile, the BSP’s 25-bp rate cut was expected. However, Governor Eli Remolona Jr.’s signal that the easing cycle may be ending triggered a sharp sell-off.
- Benchmark yields reversed and closed 5 to 11 bps higher day-on-day.
- With no major data ahead, short-term selling interest is likely to continue.
READ MORE
PSEi recovers as twin cuts stabilize sentiment
- The Philippine Stock Exchange index (PSEi) ended 30.06 points higher at 5,990.00 on Thursday, as the market responded to the twin policy moves from the BSP and the US Federal Reserve, which both delivered widely expected rate cuts that helped steady sentiment.
- Financials (+1.41%), Services (+0.84) and Industrials (+0.52%) led the day with strong moves, while Property (-1.12%) and Mining & Oil (-0.65%) softened.
- ACEN Corp. (+11.62%), JG Summit Holdings Inc. (+3.45%), Universal Robina Corp. (+2.44%), Ayala Land Inc. (+2.38%), and Converge Information & Communications Technology Solutions Inc. (+2.37%) supported the index.
- Meanwhile, SM Prime Holdings Inc. (-3.91%), PLDT Inc. (-3.08%), Ayala Corp. (-1.72%), Semirara Mining & Power Corp. (-1.61%), and DigiPlus Interactive Corp. (-1.55%) lagged the most.
- Despite the lift, the underlying market tone stayed selective, with local investors doing most of the buying while offshore players remained cautious.
READ MORE
USD/PHP closes lower amid rate cut decisions
- The USD/PHP exchange rate opened 9 centavos lower at 59.12 on Thursday, on broad dollar weakness after the US Federal Reserve cut rates by 25 basis points (bps) overnight.
- The pair initially consolidated between 59.09-59.13, but consistent offshore demand pushed the pair to the day’s high of 59.18.
- Light selling at 59.21 capped the early rally, and the pair later slid to 58.969 as dealers positioned ahead of the Bangko Sentral ng Pilipinas (BSP) decision and later reacted to the central bank’s unexpectedly hawkish tone.
- The USD/PHP exchange rate ultimately closed at 58.99, or 22 centavos lower day-on-day.
- The current support levels of USD/PHP are 58.80/90, while the resistance levels are 59.10/20.
READ MORE
Local GS market sees a reversal of trading flows
- The local government securities (GS) market saw initial strong buying interest on Thursday, after the US Federal Reserve’s rate cut and Governor Jerome Powell’s dovish comments.
- Fixed Rate Treasury Note (FXTN) 7-70 and FXTN 10-73 touched intraday lows of 5.500% and 5.860%, respectively.
- Meanwhile, the BSP’s 25-bp rate cut was expected. However, Governor Eli Remolona Jr.’s signal that the easing cycle may be ending triggered a sharp sell-off.
- Benchmark yields reversed and closed 5 to 11 bps higher day-on-day.
- With no major data ahead, short-term selling interest is likely to continue.
READ MORE
PSEi recovers as twin cuts stabilize sentiment
- The Philippine Stock Exchange index (PSEi) ended 30.06 points higher at 5,990.00 on Thursday, as the market responded to the twin policy moves from the BSP and the US Federal Reserve, which both delivered widely expected rate cuts that helped steady sentiment.
- Financials (+1.41%), Services (+0.84) and Industrials (+0.52%) led the day with strong moves, while Property (-1.12%) and Mining & Oil (-0.65%) softened.
- ACEN Corp. (+11.62%), JG Summit Holdings Inc. (+3.45%), Universal Robina Corp. (+2.44%), Ayala Land Inc. (+2.38%), and Converge Information & Communications Technology Solutions Inc. (+2.37%) supported the index.
- Meanwhile, SM Prime Holdings Inc. (-3.91%), PLDT Inc. (-3.08%), Ayala Corp. (-1.72%), Semirara Mining & Power Corp. (-1.61%), and DigiPlus Interactive Corp. (-1.55%) lagged the most.
- Despite the lift, the underlying market tone stayed selective, with local investors doing most of the buying while offshore players remained cautious.
READ MORE