Bangko Sentral has room to quicken RRR cuts: economist


Posted at Aug 09 2019 10:52 AM

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MANILA – The Bangko Sentral ng Pilipinas has room to accelerate cuts in the reserve ratio requirement for banks to aid economic growth as government catches up on spending, an economist said Friday.

The BSP cut the benchmark interest rate by 25 basis points on Thursday after second quarter gross domestic product numbers showed that growth slowed to a 4-year low.

The central bank has room for a cumulative 2 percentage point reduction in the RRR, BPI lead economist June Neri told ANC.

“The economy needs more liquidity at this point given that the economy, the spending of the government has slowed down overall spending… I think it makes sense for the acceleration of the reserve requirement until such time as the national government has clearly return to normal expenditure behavior,” Neri said.

The data dependent monetary board will likely monitor the effects of earlier reductions in the RRR and increased government spending before cutting further, ING Bank Manila economist Nicholas Mapa said in a statement.

"With the national government set for catch up spending, the impending release of liquidity should be monitored before reducing RRR further," Mapa said.