BSP and Fed Update: Moving to their own rhythm  

Despite a pause from the US Federal Reserve (Fed), the Bangko Sentral ng Pilipinas (BSP) further reduced its policy rate in its June meeting, bringing the interest rate differential down to just 75 bps.

Key points 

• Amid global uncertainties, the Federal Open Market Committee (FOMC) decided to keep the target Federal Funds Rate (FFR) at 4.25%-4.50% in its June 17-18 meeting.
• Meanwhile, the BSP’s Monetary Board proceeded with another cut in its June 19 meeting, citing the need for a more accommodative policy stance. This rate reduction brings the target Reverse Repurchase (RRP) rate to 5.25%.

What now 

• Metrobank maintains its view that the Fed will reduce its target FFR by a total of 50 bps this year, albeit at a slower pace. This will bring the target FFR to 3.75%-4.00%
• We also maintain our forecast that the BSP will cut by another total 50 bps this year, which will bring the target RRP to 4.75%.

ECONOMIC UPDATES  

Policy Rate Update: Dovish BSP Narrows IRD

Fed’s pause and BSP’s cut brings the interest rate differential down to just 75 bps.

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