Policy Rate Updates: Expect higher-for-longer rates amid lingering inflation 

The US Federal Reserve (Fed) maintained the Federal Funds Target Rate (FFR) at 5.25% – 5.50% during the Federal Open Market Committee (FOMC) meeting yesterday, May 1, as markets have widely priced in no chance of a cut this meeting. This was the sixth consecutive meeting that the FOMC decided to hold policy rates steady, following a string of 11 rate hikes, including four hikes in 2023.

We maintain our view that the Fed will likely start cutting rates in September with a total of 75 bps for the year as inflation is expected to have peaked by June, observable by July and August according to the research models. This expectation also considers the current downward trend of the US core PCE (2.6% by YE2024e) where goods disinflation has already manifested.

We expect the BSP to likely delay its first cut until the Fed begins its monetary easing. It is unlikely that the BSP will pre-empt the Fed or implement bigger rate cuts.

REPORTS 

Policy Rate Updates: US Fed leaves rates unchanged

The latest US Fed rate decision and recent developments have not changed our rate cut forecasts by the Bangko Sentral ng Pilipinas (BSP).

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