BSP and Fed Update: Same moves, different tunes

The US Federal Reserve (Fed) and the Bangko Sentral ng Pilipinas (BSP) both reduced their policy rates in their December meetings, maintaining the interest rate differential (IRD) between the two central banks at 75 basis points (bps).

Key points

• Amid signs of a sluggish labor market and elevated inflation, the Federal Open Market Committee (FOMC) delivered a 25-bp reduction to the Federal Funds Rate (FFR) bringing it to 3.50%-3.75% in its December 10-11 meeting, Eastern Time.
• Meanwhile, the BSP’s Monetary Board delivered an “insurance” cut in its December 11 meeting. This rate reduction brings the target Reverse Repurchase (RRP) rate to 4.50%.

Moving forward

• Metrobank maintains its view that the Fed will reduce its target FFR by a total of 100 bps in 2026. This will bring the target FFR to 2.50%-2.75% by end-2026.
• We also maintain our forecast that the BSP will cut by a total of 50 bps in 2026, which will bring the target RRP to 4.00%.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)          

Download our report below.

ECONOMIC UPDATES  

Policy Rate Updates: Double cut finale

US and Philippine monetary authorities cap the year with a rate cut

Download