Traders watch for next BSP, Fed moves

All eyes will be on the central banks of both the Philippines and the United States this week after the local bourse nearly dipped to 6,500 on monetary policy jitters.

Trading platform 2TradeAsia.com said in an advisory over the weekend that the Bangko Sentral ng Pilipinas (BSP) had some leeway to slash interest rates by 25 basis points for a third time during its Dec. 19 meeting.

If this happens, the benchmark rate will fall below 6 percent.

This is due mainly to “relatively more behaved” domestic inflation, according to 2TradeAsia.

It also warned, however, that the Federal Reserve’s meeting on Wednesday, Dec. 18, may still “have ripple effects at home, especially as we approach 2025 at a more fragile peso-dollar positioning.”

The BSP’s monetary policy stance often influences local equities, as a rate cut can boost investor confidence, with traders snapping up shares.

In contrast, a rate pause or hike can dampen sentiment and cause investors to shed stocks.

Inflation spike

Last Friday, the benchmark Philippine Stock Exchange Index (PSEi) closed at 6,615.51, down by 1.67 percent week-on-week as traders sold some stocks ahead of the central banks’ meetings.

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Average value turnover was at P6.7 billion, up by 10.14 percent versus the same period the previous week.

This week, 2TradeAsia sees the market’s immediate support at 6,500 and resistance at 7,000.

Last week, analysts said the inflation spike in November had strengthened the case for another rate cut. This, in turn, could give the economy a boost after a weaker-than-expected third quarter.