The Bangko Sentral ng Pilipinas (BSP) put to rest on Tuesday any more notions of further policy rate cut this year.
BSP Governor Benjamin Diokno said the central bank is already done making appropriate policy adjustments this year although he could not say the same for the banks’ reserve requirement ratio (RRR).
“Should inflation outlook continue to improve, we will continue to cut the RRR,” Diokno said during The Asset’s 14th Philippine Forum in Taguig City. This relates to that portion of deposits the banks may not deploy as loans but hold in the vaults of the BSP instead.
“That’s what we promised,” he said of the announcement reducing RRR levels to a single digit by the end of his term in 2023.
Earlier, the BSP lowered the deposit reserves by another 100 basis points from 16 percent to 15 percent.
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“The cut in reserve requirements is in line with the BSP’s broad financial sector reform agenda to promote a more efficient financial system by lowering financial intermediation costs,” the central bank said in a statement.
“At the same time, the adjustment in reserve requirement ratios is aimed at increasing domestic liquidity in support of credit activity,” it added.
On bringing the deposit reserves further down, Diokno said: “Single digit is nine, you say. You can extrapolate, two and a half years from January 2020,” Diokno told reporters.
He said lowering the RRR by 300 basis points a year is as possible as a reduction by 50 basis points a quarter as well.
The BSP’s policy-making Monetary Board has two more rate-setting meetings this year on 14 November and on 12 December.
