Mart flat, prices in 50 bps hike

The bourse ended flat minutes before the Monetary Board policy rate meeting report. The index finished at 6,824.63 points, up by 5.64 points or 0.08 percent.

Investors remained vigilant as they correctly anticipated the Bangko Sentral ng Pilipinas a 50 basis points rate hike in the Monetary Board’s policy review meeting following an off-cycle 75 bps rate adjustment last July.

Gainers are Industrials, Banks and Services counters while Mining, Oil and Property shares pulled back.

There were 96 stocks that advanced vs. 104 which declined.

Market participants may have priced-in today’s rate hike as BSP telegraphed the move, ING Senior Economist Nicholas Mapa said.

Tight bias continues

BSP Governor Felipe Medalla recently hinted the central bank would likely sustain its tightening bias even after yesterday’s rate adjustment.

ING expects inflation to accelerate further, likely peaking at 6.8 percent by October, in line with BSP’s own projections for inflation to average 5.4 percent for 2022.

Against this backdrop of rising prices, we believe that BSP can carry out 25 bps rate increases at each of the remaining policy meetings for the balance of the year, Mapa indicated.

This would take the BSP’s policy rate to 4.5 percent by December, according to Mapa. We expect a depreciation bias for the peso in the near term as the import season kicks into high gear.

At the same time, the five-day rally in the US equities Dow Jones Industrial Average, -0.50 percent; Standard and Poors 500, -0.72 percent lost steam on Tuesday due to the miss in Target’s earnings and as investors digest the minutes from the US Federal Reserve’s latest meeting.

Based on the published minutes, the central bank stays committed to tame inflation but hinted that it could adjust its tightening pace depending on market conditions.

On the other hand, some eco data are due out on Thursday, including weekly jobless claims and existing home sales.

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