BSP Governor Benjamin Diokno
MANILA – Any reduction in banks’ reserve requirement ratio (RRR) will be based on its necessity vis-à-vis the economic recovery, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said on Thursday.
In a virtual briefing, Diokno said RRR adjustments are “always on the table” but noted that decisions towards this “will be made in conjunction with the BSP’s broader strategy to normalize monetary policy settings when domestic demand conditions attain significant recovery from the pandemic.”
“The assessment will depend largely on how liquidity dynamics evolve and how quickly credit activity recovers to the extent allowed by the outlook on inflation and growth,” he said.
BSP’s policy-making Monetary Board (MB) slashed banks’ RRR by as much as 200 basis points last year as part of the central bank’s measures to ensure that economic activities will remain robust, by boosting financial institutions’ liquidity for lending.
Economists project additional RRR cuts as the MB keeps the central bank’s key policy rates steady after slashing it off by a total of 200 basis points last year.
To date, the BSP’s overnight reverse repurchase (RRP) facility rate is at record-low 2 percent.
Diokno said “consistent with our data-driven approach to monetary policy, operational adjustments to the RR will be carried out as necessary depending on data outcomes.”
“As it is present monetary settings continue to provide ample stimulus to economic activity. And the BSP will remain patient in maintaining policy support alongside ongoing fiscal and public health interventions, which will ensure that the economic recovery will be fully sustainable,” he added. (PNA)
