The Trust and Investments Group of BDO Unibank Inc. expects the Federal Reserve, the central bank of the U.S., to start an interest rate-cutting cycle within the first half of next year, with total reduction estimated to reach 150 basis points.
Between March last year and July this year, after keeping interest rates around zero early in 2022, the FED raised the Federal Funds Rate by a total 525 basis points to 5.50 percent to help tame inflation.
“The decelerating economy in the US indicated by moderating inflation, a cooling job market, and a deteriorating outlook for consumer spending could lead the FED to cut interest rates at least 6 times in 2024, with expectations of starting the cuts in the Q2 of the year, totaling 150bps by 2024,” BDO’s trust group said in the latest edition of its “Portfolios & Perspectives.”
It said that the FED is expected to continue monetary policy easing “into 2025 with at least 4 more rate cuts.”
An interest rate pivot and actual rate cuts could lead to a sharp rally in the global stock markets, including the Philippine Stock Exchange, as investors seek better yields as major central banks follow the FED action. Indeed, many stock markets have already started to advance in anticipation of the interest rate pivot.
