The Bangko Sentral ng Pilipinas, or BSP, raised the possibility of reducing the reserve requirement ratio, or RRR, within this year.

“Within the year, it’s very possible,” BSP Governor Eli Remolona Jr. said. A lower RRR allows banks to lend more funds to clients.

Remolona stressed the central bank will be looking into the latest economic data to determine the proper time and level for the RRR cut.

The BSP chief said, so far, there is no serious threat which could drastically quicken inflation.

“We don’t see a smoking gun. We like the trend so far,” Remolona said.

Prices within goal

Inflation continued to slow to 3.9 percent last month from 4.9 percent in October. The BSP aims for an inflation downtrend within 2 to 4 percent.

However, Remolona had said there should be one or two more figures to see that inflation is clearly slowing down within the target.

He said possible inflationary risks include the supply shortage of certain commodities, especially oil and rice.

“Supply shocks and the increase of prices of rice are factors. Supply shocks lead to second-round effects which affect expectations. We see that in the prices of services, transport fares,” Remolona said.

Given these factors, the BSP chief said the central bank sees a baseline inflation of 4 to 4.2 percent for this year.

These statements followed the BSP report on satisfactory loan quality of banks with a collective non-performing loan ratio of 3.4 percent and 9.3 percent loan growth to P13.3 trillion as of November last year.