Stocks may rise as Fed keeps target rate steady

LOCAL SHARES may climb when trading resumes on Friday after the US Federal Reserve kept borrowing costs steady and amid expectations that Philippine inflation slowed last month.

The Philippine Stock Exchange index (PSEi) went up by 11.79 points or 0.19% to close at 5,973.78 on Tuesday, while the broader all shares index rose by 7.70 points or 0.23% to end at 3,254.17.

The market was closed for public holidays on Nov. 1-2.

“The first trading day of November could see a positive reactive move after the Federal Reserve kept interest rates steady and Chairman Jerome Powell’s remarks after the policy decision were less hawkish than expected,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

“This coming Friday, the local market may digest the latest developments in the US’ monetary policy. In particular, investors are expected to weigh the Federal Reserve’s latest decision wherein policy rates are kept unchanged against concerns that a policy rate hike by the Fed in the near future is still possible,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco likewise said in a Viber message.

The Federal Reserve held interest rates steady on Wednesday as policy makers struggled to determine whether financial conditions may be tight enough already to control inflation, or whether an economy that continues to outperform expectations may need still more restraint, Reuters reported.

Fed Chair Jerome Powell said the situation remained something of a riddle, with US central bank officials willing to raise rates again if progress on inflation stalls, wary that a rise in market-based interest rates may begin to weigh on the economy in a significant way, and trying not to disrupt, any more than necessary, an ongoing dynamic of steady job and wage growth.

In a press conference after the end of a two-day policy meeting, Mr. Powell said the better course of action for now, given the uncertainties, was to maintain the Fed’s benchmark overnight interest rate in the current 5.25%-5.5% range, and see how job and price data evolve between now and the next policy meeting in December.

Market sentiment could get a boost from expectations that Philippine inflation slowed in October, Mr. Tantiangco added.

Headline inflation may have eased to 5.1-5.9% in October as prices of fuel and key food items dropped, the Bangko Sentral ng Pilipinas said late Tuesday.   

If realized, October inflation would be slower than 6.1% in September and 7.7% a year earlier.

The Philippine Statistics Authority will release October consumer price index data on Nov. 7.

However, lingering concerns over the conflict in the Middle East could affect trading, Seedbox Securities, Inc. Equity Trader Jayniel Carl S. Manuel said in an e-mail.

Philstocks Financial’s Mr. Tantiangco said the PSEi could test the 6,000 level on Friday. — SJT with Reuters