BSP not closing doors on further RRR cuts

THE BANGKO SENTRAL ng Pilipinas (BSP) could still cut banks’ reserve requirement ratio (RRR) further towards December after a cumulative 300-basis-point reduction this year so far should relevant data warrant such move, BSP Governor Benjamin E. Diokno signaled on Tuesday.
Monetary authorities, however, are likely done for 2019 with cuts in benchmark interest rates that have totaled 75 bp, through 25bp equal cuts on May 9, Aug. 8 and Sept. 26, he added.
Mr. Diokno told reporters on the sidelines of The Asset Philippine Forum in Taguig City that the central bank is waiting for relevant economic data to be released in the coming months.
Ask whether the central bank is done with easing the RRR in 2019, he said: “Sabi ko nga (As I’ve said), we’re looking at the data, kung pwede pa, bakit hindi? (If it’s still possible, why not) We’re looking at October [data]. September lang ’yung lumabas e (Only September data have been released).”
Among others, monetary authorities are watching if RRR cuts totaling 200 bp in 2018 and 300 bp so far this year have fueled lending to economic activities. The central bank reported at the start of this month that money growth eased in August despite continued demand for credit.
Domestic liquidity or M3, the broadest measure of money supply in an economy, grew 6.2% year-on-year to P11.9 trillion, slowing from the 6.7% growth logged in July. Month-on-month, money supply inched up by 0.3%.
Outstanding loans of universal and commercial banks grew 10.5% year-on-year in August, slowing from July’s 11.1%.
The RRR for universal and commercial banks, thrift banks and rural banks are now at 15%, five percent and three percent, respectively.
Remaining macroeconomic data that may weigh on monetary policy decisions include October and November inflation on Nov. 5 and Dec. 5, respectively, and the third-quarter gross domestic product to be released on Nov. 7.
“So meron ka pang (you still have) third quarter di ba? Lalabas pa ’yung World Economic Outlook around October so marami pa kaming titignan. Hindi pa sarado (The World Economic Outlook will be released in October so we still have a lot of data to assess. We may not yet be done with RRR cuts for this year).”
The Monetary Board has two more policy meetings left for the year on Nov. 14 and December 12, although it can act on the RRR in any of its weekly meetings.
“Nasa 15[%] na tayo (We are already at 15% for big banks’ RRR)… So you can extrapolate, I have two years and a half [left as BSP governor].”
Mr. Diokno has vowed to reduce the RRR to single digit before his term ends in July 2023.
Asked whether any cuts for 2020 will be similar to the cumulative cuts amounting to 300 bps announced so far for the year, Mr. Diokno replied: “Pwede naman naming gawing 50 [bps]… per quarter (We can also opt to trim RRR by 50 bps per quarter)… depende lang nga sa (it depends on) inflation dynamics.”
Asked if there could be even more cuts in policy interest rates, he said: “‘Yun siguro papabayaan na muna natin. Sarado na muna ‘yun (Maybe let’s leave it at that. That will be it)…”
“I think everybody’s happy.” — Luz Wendy T. Noble