Tariffs, Fed policy and BSP easing shape markets in Q2

US TARIFFS, Federal Reserve's uncertain fiscal policies, and the Bangko Sentral ng Pilipinas’ (BSP) easing cycle, were the main drivers of the local financial market’s performance in the second quarter of 2025, analysts said.

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These factors are expected to continue impacting the country’s financial market for the rest of the year, the central bank said.

At the end of the second quarter, the benchmark barometer Philippine Stock Exchange Index (PSEi) closed at 6,364.94, down 0.7% from a year earlier.

Meanwhile, data from the Bankers Association of the Philippines showed that the peso closed at P56.33 as of end-June, stronger than the P58.61 finish a year ago.

At the secondary bond market, domestic yields dropped by an average of 6.22 basis points (bps) year on year, based on PHP Bloomberg Valuation (BVAL) Service Reference Rates published on the Philippine Dealing System’s website as of end-June.

TRADE UNCERTAINTY

Analysts said that the US trade policies was one of the main drivers of the domestic market movements during the second quarter.

“US President Donald J. ‘Trump's sweeping tariffs and rapidly shifting policies triggered a wave of uncertainty across the global economy, (which) led the US Federal Reserve to hold off on interest rate cuts, and weighed on investor sentiment,” Chinabank Research said in an email.

It added that with Mr. Trump promising more tariffs, changes to US trade policy will likely remain a significant market mover for the year.

This escalation of US tariffs created volatility in global markets, said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc., in an email.

He added that uncertainty over future trade measures contributed to a cautious sentiment from investors and global supply chains.

Last Aug. 7, Mr. Trump implemented a 19% tariff on Philippine goods. This was lower than the 20% the US had threatened to carry out, but still higher than the 17% levy initially announced last April.