BSP may cut rates by mid-2024

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) is expected to cut interest rates only when the US Federal Reserve starts doing so, likely by the middle of next year.

During the launch of the Sun Life Prosperity World Income Fund (WIF), Sun Life Investment Management and Trust Fund Corp. (SLIMTC) said the BSP may only start easing monetary policy by mid-2024.

This, as SLIMTC Equities and Global Funds head Michael Adrian Vergara noted that the BSP has tended to move in line with the Fed.

“It’s a matter of them managing the peso and managing liquidity within our market,” Vergara said.

“We think that the Fed will potentially cut by the middle of next year and I expect the BSP to move around that time as well. They tend to move together,” he said.

Last month, the BSP left policy rates unchanged at 6.25 percent, marking a third consecutive meeting of pause, as widely expected.

The Fed, on the other hand, is no longer expected to raise rates in the upcoming meetings, but rate cuts don’t appear on the table either.

The Fed will have its next policy meeting on Sept.19 while the BSP will follow suit two days later.

Further, Vergara noted that the decision of the Fed would impact the market to look at other assets, such as equities, corporate bonds, and even a little bit of the high yield bonds as well.

“We need to see the Fed really communicate to markets that they are done hiking. Because right now, everybody is just buying offers that have good yields. There’s really no incentive for people to go buy the riskiest thing,” Vergara said.

“If the Fed moves down interest rates, the yields of fixed income products we see in the market will also adjust to that and that will sort of force us to look at other assets again,” he said.

Meanwhile, Sun Life has launched the WIF, a feeder fund where investments are put in a variety of global assets through the BlackRock Dynamic High Income Fund, which is a tactical fund investing in both global bonds and global equities.

Sun Life Asset Management Co. Inc. strategic development, marketing and training head Dino Macasaet said the feeder fund seeks to provide consistent high income and provides upside for capital gains and uses tactical asset allocation across stocks, bonds and complementary sources of income.

The WIF, with an initial investment of P10,000, can potentially give monthly cash payouts.