MANILA -- Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Wednesday it would be "illogical" at this time for banks to increase interest rates at a time when regulators are lowering borrowing costs to help the public cope with the COVID-19 pandemic.
The BSP will cut further both the benchmark interest rate, currently at 3.25 percent, and the RRR or reserve requirement ratio for banks which is at 12 percent, Diokno told DZMM.
"Illogical 'yung magtaaas ka ng interest ngayon kasi unang una, binabawasan nga namin ang intrest rate malaki na binawas natin," the governor said, in response to a question.
(It's illogical to raise interest rates at this time because first of all, we are reducing the benchmark interest rate, we've lowered it by a lot.)
"Pababa nang pababa ang interest rates natin. It is illogical kung ikaw isang bangko, magtataas ka ng interest rates at this time," he said.
(Interest rates are going down. It is illogical for a bank to increase interest rates at this time.)
The BSP has rolled back 1.5 basis points of the total 1.75-basis point increase in the overnight borrowing rate from 2018, which was meant to tame inflation at that time from 10-year highs.
"Iniisip pa namin ngayon na ibaba pa namin sa mga sususnod na araw," he said.
(We cut interest rates by 1.5 percent and we are thinking of bringing it down further in the coming days.)
The 8-point reduction in the RRR resulted in P800 billion more money circulating in the system, he said. The RRR was cut to 12 percent from 20 percent.