A potential reserve requirement ratio (RRR) cut before the end of 2025 is not entirely off the table, according to Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr.

In a Monday evening press briefing following the BSP’s inaugural Central Banking Symposium in Panglao, Bohol, Remolona said the central bank needs to normalize market liquidity before deciding on any potential year-end rate cut.

“I would say it’s on the table but there’s no urgency,” Remolona said. “I think we can still reduce it. The timing depends partly on how successful we are on normalizing liquidity in the market.”

The central bank previously implemented a reduction in the RRR — which dictates the percentage of deposits banks must hold as reserves — in March 2025, cutting the ratio by 200 basis points (bps) for universal and commercial banks (U/KBs) and non-bank financial institutions with quasi-banking functions (NBQBs); 150 bps for digital banks; and 100 bps for thrift banks (TBs). Following those adjustments, RRRs fell to 5.0 percent for U/KBs and NBQBs, 2.5 percent for digital banks, and 0.0 percent for thrift banks.

“Five percent is pretty low already, so that’s why there’s no urgency,” Remolona added.

Reducing the RRR increases liquidity in the banking system by allowing banks to keep fewer reserves and lend more, which can lower interest rates, encourage borrowing, and stimulate economic activity. However, higher liquidity can also fuel inflation, weaken the peso, and increase financial risks if lenders ease credit standards too aggressively.

The BSP is closely monitoring inflation, which stood at 1.7 percent in October — below the central bank’s 2 to 4 percent target range for the year. Remolona said inflation expectations remain “well-anchored.”

“At the same time, we’re still trying to measure the degree of anchoring more precisely,” he added.