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BSP chief signals more policy tweaks ahead

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ANOTHER CUT in key policy rates as well as banks’ reserve requirement ratio (RRR) “can take place some time next month”, BSP Governor Benjamin E. Diokno said in an interview aired over ABS-CBN News Channel on Friday afternoon.

While the Monetary Board’s sixth policy review is scheduled on Sept. 26, the RRR cut may take place in one of the next non-policy-setting weekly meetings of the Monetary Board, Mr. Diokno said.

“The triple R cut can start next month. We will have a meeting in the next six weeks from now. And we’re going to discuss another possible 25-basis-point cut,” Mr. Diokno said when pressed on the timing of the next RRR reduction, after the phased 200 bp cut that brought the level to 16% for big banks and to six percent for thrift banks.

He said he remains committed to paring the RRR down to “single-digit level” when he ends his term — the remainder of the six-year term of the late BSP Gov. Nestor A. Espenilla, Jr. who died last Feb. 23 — in July 2023.

Describing even the currently reduced RRR as “still very high”, Mr. Diokno said “we are convinced that we still have to cut it”.

The timing of RRR cut, he said, will still depend on liquidity, as the BSP watches if reductions earlier this year — which are estimated to have released more than P200 billion into the system — resulted in lending to productive economic activities.




The central bank announced on July 31 that money supply growth steadied at 6.4% year-on-year to about P11.78 trillion in June — and edged up by about 0.3% month-on-month — even as it trimmed lenders’ RRR, the last phase of which took effect on July 26.

The next interest rate review on Sept. 26, he added, will consider “principally” August inflation rate scheduled to be reported by the the Philippine Statistics Authority (PSA) on Sept. 25, besides “what is happening externally” and consumer spending. Other economic growth-related data that will have been reported by the next monetary policy review are July factory output on Sept. 5 and July international merchandise trade five days afterwards.

The central bank’s policy-policy setting body on Thursday cut benchmark interest rates by a quarter percentage point, hours after the PSA reported that the economy grew at the slowest pace in four years at 5.5% in the second quarter, bringing first-half expansion to the same pace against an official 6-7% target for 2019, and two days after the statistics agency said that July’s inflation was the slowest in two-and-a-half years at 2.4%, taking the year-to-date pace to 3.3% against the BSP’s 2-4% target range for the year.

Mr. Diokno said on Friday that, upon reviewing projections after the release on Thursday of disappointing second-quarter GDP data, his staff determined that the “lower” end of the government’s “6-7% growth target is entirely doable”.

Malacañang on Friday said economic managers are taking steps to prod economic expansion faster in the quarters ahead. “While growth slowed down in the second quarter of this year, the Office of the President has been assured by our economic managers that this is simply a temporary setback,” Presidential Spokesperson Salvador S. Panelo said in a statement. — with M.T. Amoguis and C. A. Tadalan

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