Philippines: Economy ripe for bank reserve cut – BSP chief

  • The economy is ripe for another cut in bank reserves, the Bangko Sentral ng Pilipinas (BSP) signaled to the banking industry on 25 Jan 19, even as one senior monetary official noted that liquidity conditions need to be tight enough to warrant such adjustments.
  • “We now see scope for further reduction on the RRR as we see inflation returning firmly to within target and with inflation expectations stabilizing,” BSP Officer-in-Charge and Deputy Governor Chuchi G. Fonacier said.
  • Apart from having a within-target monthly inflation reading and well-anchored inflation expectations, there should be actual “tightness” of money supply.
  • BSP Deputy Governor Diwa C. Guinigundo said policy makers must await “tight” liquidity conditions before further cuts in the reserve requirement can be introduced.
  • Mr. Guinigundo has said that domestic liquidity is not as tight as some market watchers observe it to be, citing strong demand for the BSP’s weekly term deposit auctions as well as for the Treasury’s regular offering of debt papers.
  • The BSP introduced two cuts of 100 basis points (bps) each to the 20% reserve standard for universal and commercial banks in 2018, which it described as “procedural” tweaks to reduce the cost of borrowing money in the financial system.
  • The RRR now stands at 18% of a bank’s total deposits.
  • This is in line with Mr. Espenilla’s long-term goal of bringing the RRR down to single-digit level by 2023, when his six-year term as governor ends.

External Link: https://www.bworldonline.com/economy-ripe-for-bank-reserve-cut-bsp-chief/

28-Jan-2019


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