BSP chief sees room for monetary policy easing

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Benjamin E. Diokno took the helm of the central bank on Thursday, making him the fifth governor of the Bangko Sentral ng Pilipinas (BSP). Photo by Geremy Pintolo, The Philippine Star

By Melissa Luz T. Lopez, Senior Reporter

THE central bank can start considering cuts in policy rates, new Governor Benjamin E. Diokno said Friday, but noted that timing remains the issue.

“Given the decelerating inflation in the Philippines, there’s an opportunity for monetary easing but as I’ve said, that would be dependent on the data that will be given to us by our technical staff,” Mr. Diokno said during his first media briefing as governor of the Bangko Sentral ng Pilipinas (BSP).

“There’s room for monetary policy easing if the present situation continues. When? We would announce it at an appropriate time.”

Mr. Diokno took the helm of the central bank on Thursday, making him the fifth governor of the BSP. He will serve the remaining four years of the term of the late Gov. Nestor A. Espenilla, Jr. which ends July 2023.

The former Budget chief said he will maintain the BSP’s “institutional independence,” adding that all policy decisions will be deliberated upon by the seven-member Monetary Board as a “collegial body.”




The board will hold a rate-setting meeting on March 21, the second this year and the first to be led by Mr. Diokno.

Benchmark interest rates currently range from 4.25-5.25%, reflecting the cumulative 175 basis point increase in policy settings last year which were meant to arrest rising inflation expectations.

Mr. Diokno said on Wednesday that he also wanted to “expedite” the process of cutting the 18% reserve requirement ratio (RRR) for banks, but now clarified that this is not solely upon him.

“Our policy will be determined by analyses, evidence-based, and will be decided upon by the board. I cannot on my own decide on the cut in the reserve requirement but (that) will be taken up by the board,” the new governor added.

“I’m an action person. If there’s a decision, I want it done as soon as possible.”

The central bank last year trimmed the RRR by two percentage points in two moves, in line with Mr. Espenilla’s goal to bring it to single-digit level by 2023 and reduce the cost of money here.

BSP Deputy Governor Diwa C. Guinigundo said discussions to further reduce the RRR are “always on the table” for the Monetary Board.

For his part, Mr. Diokno said he is also counting on the “strong and professional” organization to “see me through the challenges of governorship.”

DEBT SECURITIES
Separately, Mr. Guinigundo said initial work on the BSP’s authority to float debt papers has started.

The central bank is preparing a roadmap that will detail how they can issue debt instruments, as provided by Republic Act 11211 which strengthened the BSP’s charter.

Once completed, the roadmap will be presented to the Monetary Board before it can be in place. Only then can they do market-sounding exercises with banks to determine the tenor of such instruments, Mr. Guinigundo added.

“We recognize that the issuance of the central bank bills or bonds should not compete with the Treasury,” he said.