MANILA -- Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Sunday there was still room to cut the benchmark interest rate and banks' reserve requirement to save the economy from the coronavirus pandemic.
Diokno last week cut the overnight rate, used by banks to price loans, by 50 basis points, the second such reduction in as many months. He also earlier slashed the reserve requirement ratio or RRR by 200 basis points.
The benchmark lending rate now stands at 2.75 percent, falling below 3 percent in 2018. The RRR is at 12 percent and Diokno said he could bring it down to single digit within the year, ahead of his 2023 target.
"We promise to do everything to show that we are ready, we are resilient. We still have a lot of bullets in our arsenal to help the national government meet this calamity," Diokno told ANC.
Inflation is forecast to fall below 2 percent, compared to the BSP's 2 to 4 percent target, Diokno said. "That gives us more room for maneuver," he said.
Every 1 percentage point cut in the RRR adds P10 billion in liquidity that banks can give out as loans, among other financial instruments, according to Diokno.
Last week, the Bangko Sentral also allowed banks to count any new lending to small and medium enterprises as a reduction in their RRR, he said. While there is no effective cut in the RRR, Diokno said this would allow more money to circulate in the system.