MANILA – Easing inflation gives the Bangko Sentral ng Pilipinas room to cut both interest rates and the reserve requirement of banks, Philippine National Bank President Wick Veloso said Wednesday.
Inflation slowed to 4.4 percent in January, below market expectations and analysts expect the BSP to keep its benchmark rate steady at 4.75 percent during its first meeting for the year on Thursday.
The BSP could cut the overnight borrowing rate by 25 basis points in the first quarter. Slashing the reserve ratio requirement will be a "balancing act," Veloso told The Briefing on ANC's Market Edge.
"The first quarter is already ripe for a reserve requirement cut and it can be a combination of reserve requirement and interest rate cut considering the significant reduction in headline inflation," he said.
"Interest rates will have to come off. It’s just a matter of making sure that inflation numbers continue to demonstrate its downturn and Bangko Sentral ng Pilipinas will come up with the necessary tools," he said.