The view of fewer Fed cuts and the peso’s move

For months, financial market watchers and investors were at the edge of their seat over who will next lead among the world’s most influential central banks.

On January 30, Kevin Warsh got US President Donald Trump’s nomination as the next chairman of the Federal Reserve (Fed).

Now, observers see Warsh, if confirmed by lawmakers, tilting the Fed toward a less dovish stance than previously thought.

Stubborn inflation in the US underscores the need to keep a relatively less accommodative monetary setting and carefully time any further policy rate reductions. At the same time, current weakness in the US labor market calls for continued policy easing.

Related article: Fed Update: Steady rates, shifting views

Balancing risks to both sides of the Fed’s dual mandate of maximum employment and stable prices suggests that there is still space to deliver more rate cuts.

Metrobank now sees the end-2026 forecast for the Fed Funds Rate (FFR) at 3.25%, equivalent to a cumulative 50 basis points (bps) worth of cuts this year. This is down from the 100 bps previously estimated.

The currency talk

The revision could broaden the difference between US and Philippine policy interest rates than initially thought.

Despite this, an anticipated economic growth rebound and improved investor confidence, thanks to better government spending, could support the peso.

Still, the projected current account deficit this year — although narrower than last year’s — would cap the peso’s strength.

Metrobank revises its end-2026 dollar-peso forecast to 59.7 from the previous 60.8. We also change our estimate for end-2027 to 58.5 from 58.9.

(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.)