THE BANGKO SENTRAL ng Pilipinas (BSP) will watch inflation data set to be reported on Dec. 5 to see whether the economy will be ripe for another cut in benchmark interest rates and banks’ reserve requirement ratio (RRR) next monthy, BSP Governor Benjamin E. Diokno told reporters last Monday.

Mr. Diokno had said early last month that the BSP was done with its policy easing cycle for this year after cutting benchmark interest rates by a total of 75 basis points (bps) and banks’ RRR by a total of 400 bps.

“When I said we’re done, we were not expecting na ’yung inflation namin will be very very low. Nag-0.8 (%) tayo (We had a 0.8% inflation in October). So let’s see what will be the actual [inflation for November],” he told reporters on the sidelines of the BSP’s Christmas lighting ceremony on Monday evening.

While October inflation was the slowest in nearly three-and-a-half years, the BSP now expects November inflation to have picked up to 0.9-1.7%, while a poll BusinessWorld conducted late last week yielded a 1.2% median.

“Siguro we’ll look at December and then maybe early January mare-resume namin ‘yung monetary easing,” Mr. Diokno added, saying he was referring to “both” interest rates and RRR.

“Pwedeng by January. We’re looking at the December data. November December [inflation data].”

Benchmark interest rates now stand at 3.5% for overnight deposit, four percent for overnight reverse repurchase and 4.5% for overnight lending, while the RRR is now at 14% for universal and commercial lenders as well as nonbank financial institutions with quasi-banking functions, four percent for thrift banks and three percent for rural lenders.

The BSP’s Monetary Board will hold its eighth and last policy review for this year on Dec. 12.

BUT RRR CUTS DONE FOR 2019
Asked about the possibility of another RRR cut towards yearend, however, Mr. Diokno told reporters: “Closed na ’yun (It’s closed).”

“I’m ahead of schedule… [to cut the RRR by] 2023 to single digit,” he said, referring to the end of his term in July that year.

He added that monetary authorities are now watching how the economy has so far been absorbing RRR cuts, saying: “… we don’t know the impact yet” and noting that the latest cut of 100 bps that was announced late in October and which took effect at the start of this month “will effectively release about a hundred billion” into the system.

Latest BSP data showed that money supply in October edged up by 8.5% to P12.1 trillion, picking up from September’s 7.7% expansion.

Credit growth, however, slowed to 9.3% in October from September’s 10.5%.

Mr. Diokno said that the slower loan growth might be due to policy tightening done by the BSP last year in a bid to rein in successive multiyear-high monthly inflation rates.

“’Yung growth kasi siguro partly ‘yung tightening nung 2018 (Slow loan growth could be partly due to the tightening in 2018 totaling 175 bps)… As I said, monetary policy works with a lag. So may impact talaga ’yun, kaya nga we started unwinding (It really has an impact, that’s why we started unwinding),” he explained. — LWTN

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