Make up your mind, BSP tells market on reserve ratio, overheating

Michelle Ong, ABS-CBN News

Posted at Jan 19 2018 03:46 PM | Updated as of Jan 19 2018 04:39 PM

MANILA - Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said Friday the market should make up its mind whether regulators should cut the reserve requirement for banks or address concerns over the economy overheating.

Guinigundo said the BSP was "addressing" both contrasting issues.

"I think the market should make up its mind. What do they really want? Do they want BSP to deal with overheating or at the same time decrease the reserve requirement so we can infuse the market with more liquidity?" he told reporters.

"The reduction of reserve requirement is necessary, but timing is also very important," he said.

Guinigundo said regulators "don't believe there is overheating" in the economy.

The BSP's monetary board will meet for the first time this year on Feb. 8.

Analysts expect the BSP to raise interest rates twice this year, though not necessarily in February, to address quickening inflation.

When it's not adjusting the benchmark rate, the Bangko Sentral has in the past adjusted the reserve requirement for banks to manage liquidity or the amount of money circulating in the system.

Guinigundo said higher taxes on fuel and sugar-sweetened drinks that took effect last Jan. 1 could stoke inflation, but still within the bank's 3 to 4 percent target.

He said inflation or the rate of increase in consumer prices, could pick up to 3.4 percent this year before slowing down to 3.2 percent in 2019.