By Luz Wendy T. Noble, Reporter
THE Philippine central bank can still use monetary tools including further policy easing to boost liquidity amid a coronavirus pandemic, its governor said on Friday.
“The Bangko Sentral ng Pilipinas (BSP) has yet to exhaust the conventional monetary instruments in its toolkit to support the liquidity requirements of the economy, should conditions warrant it,” BSP chief Benjamin E. Diokno said in a speech.
The central bank did pause but would provide further stimulus if needed, he added.
“The current policy rate right now is 2.75%,” the central bank governor said. “We still have much leeway especially with inflation going down, so that’s one area — policy rates,” he added.
Benchmark interest rates fell to a record in April, with the central bank cutting rates by a total of 125 basis points (bps) this year to shield the economy from a lockdown that has been extended thrice in the capital and nearby cities.
The policy-setting Monetary Board will meet next on June 25.
Mr. Diokno said BSP could also ease the reserve requirements for banks, although “right now there’s ample liquidity in the system, there’s no pressure yet to cut the reserve requirement.”
The reserve requirement for big banks have fallen by 200 bps this year to 12% to boost liquidity during the lockdown. The reserve requirements for thrift and rural banks were kept 4% and 3% respectively.
The Monetary Board has allowed Mr. Diokno to cut the reserve requirement by a total of 400 bps this year.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said the central bank had done quite a lot of policy easing and a pause was prudent.
“Determining the sufficiency and appropriateness of monetary easing measures would also provide extra ammunition on the part of the BSP especially when these are needed the most in the coming months,” he said in a mobile-phone message.
Robert Dan J. Roces, chief economist at Security Bank Corp. said the central bank appeared to have eased policy in anticipation of recovery after the health crisis is over.
Ruben Carlo O. Asuncion , chief economist at UnionBank of the Philippines, Inc. said the central could use “warlike” monetary responses to shield the economy, which the virus has brought to a near standstill.
“Just print money and prop up liquidity,” he said. “This has been used in war times so if monetary authorities think that the situation calls for warlike monetary responses, this should be in the arsenal,” he said.