BSP done with rate cuts this year – Diokno
RRR may still be trimmed
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said yesterday there would be no more interest rates cut for the year after reducing the benchmark rate by a cumulative 75 basis points (bps).
Diokno however said they might reduce banks’ reserve requirement ratio (RRR) in December if the manageable inflation environment will permit it.
Diokno said the market is “happy” with the 75 bps cut in policy rates and that they could now pause on further monetary policy action. “We will let it (interest rate) be for the moment,” he told reporters on the sidelines of a forum hosted by Hong Kong-based financial magazine The Asset in Bonifacio Global City.
The overnight reverse repurchase rate is currently at 4.0 percent, while the overnight deposit rate and lending rate are at 3.5 percent and 4.5 percent, respectively.
As for RRR cuts, Diokno said it was still possible to make one more decision to reduce the reserves ratio before 2019 closes. The BSP will have to wait for the next data in liquidity/M3 and lending for October, November and December. The data-dependent Monetary Board is not ruling out another RRR cut until they see the rest of the data, said Diokno.
The RRR for big banks is now at 15 percent.
The BSP chief reiterated that in the next years, it is possible to have 50 bps RRR cut every quarter for a total 200 basis points in a given year. But, Diokno said they could also replicate the 300 bps RRR cut in 2020 that they did so far for this year. “That’s one possibility,” he said.
He has said that besides the inflation data for October and November, they will also wait the third quarter GDP and the World Economic Outlook report of the International Monetary Fund which will come out this month.
The BSP has recently decided to reduce RRR again by another 100 bps or by one percent to 15 percent by the first week of November.
The BSP in total has lowered RRR by 300 bps, higher than 2018’s 200 bps reduction. The first 200 bps (implemented by end-July) reduction, by BSP estimates, released 1200 billion of fresh funds into the financial system. The first RRR series of cuts will be reflected in the August and September domestic liquidity and bank lending data.