THE outcome of the US Federal Reserve's June 11–12 meeting will figure in the stock market's direction this week following a satisfactory start to the month.

After plunging in the last week of May amid concerns over the direction of key interest rates, the benchmark Philippine Stock Exchange index (PSEi) closed at 6,518.76 on Friday, 1.33 percent higher week-on-week.

Lower-than-expected May inflation was said to have factored in last week's rebound as it bolstered the likelihood of the Bangko Sentral ng Pilipinas's (BSP) cutting interest rates.

Investors will likely also keep in mind, however, that an early easing could make Philippine assets less attractive with the Fed still expected to keep its rates higher for longer.

The peso has fallen to 19-month lows as a result, which led to the PSEi closing at the 6,300 level twice in the last two weeks.

The policy picture could clear a bit following this week's meeting by the US central bank, which is expected to hold fire anew and temper expectations of an early rate cut as inflation there remains above target.

Results of the Federal Open Market Committee meeting will be considered by the BSP's policymaking Monetary Board when it meets later this month on June 27.

"The market was able to bounce back as investors digested our May inflation figure, which remained within the government's target range," said Japhet Tantiangco, senior research analyst at Philstocks Financial Inc.

It could experience "sideways movement" this week, however, "influenced by global economic cues and domestic developments."

Tantiangco noted a stronger-than-expected US jobs report — seen as allowing the Fed to keep rates higher for longer — and currency fluctuations as challenges to sustaining the stock market's momentum.

US stocks closed lower on Friday following the release of the jobs data, and the outlook for a Fed rate cut has shifted to a November start instead of September.

The BSP, in contrast, has said that it could start easing policy as early as August.

Rizal Commercial Banking Corp. chief economist Michael Ricafort, meanwhile, said domestic market sentiment could continue to be boosted by government efforts to control inflation.

"The reduction in rice import tariffs and favorable global crude oil prices may support local inflation trends and potentially pave the way for local policy rate adjustments," he noted.

Tantiangco said that investors should remain vigilant, adding that "staying attuned to both local and international economic trends will be crucial in making informed investment decisions."

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