Easing continues, terminal rate in sight
From AB Capital's The Opening Bell: Three Moves
Event
The BSP is widely expected to cut rates 25bp this week to 4.25%, marking a sixth consecutive reduction, as weak 4Q25 GDP, subdued inflation near 2%, and soft business confidence reinforce the case for additional policy support.
View
We think the cut is largely priced in and reflects growth insurance rather than emergency easing. In our view, the BSP is approaching its terminal rate, with policy likely pausing afterward as inflation trends toward 3% and financial conditions gradually normalize.
Catalyst
Key catalysts include 1Q26 GDP data and inflation trajectory into midyear. If growth remains weak, one additional 1H26 cut is possible; stronger consumption may lock policy at 4.25%. Sensitivity: narrower rate differentials could pressure the Php if dollar strength re-emerges.
Action
We prefer banks and REITs that benefit from lower financing costs but stable terminal rates, including BDO, BPI, and AREIT. We believe a near-end easing cycle improves earnings visibility by reducing rate volatility while still supporting credit demand recovery.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
- Latest
