Diokno: 'No rush' on RRR, interest rate cut to depend on data


Posted at Dec 20 2019 02:21 PM | Updated as of Dec 20 2019 03:29 PM

MANILA -- Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday there was "no rush" to reduce the reserve requirement ratio for banks and the timing of the next interest rate cut would depend on data.

The BSP has the "luxury of time" to monitor how earlier reductions in the RRR have affected the market. Its "desire" is for freed up liquidity to go to small and medium scale lending, he said.

"I have 500 basis points to cut between now and the end of my term. That's 14 quarters. To me, there's no rush for me to do that. I can take my time," he said.

Diokno earlier signaled that he would bring down the RRR to "single digit" by the end of his term in 2023. He also signaled a 50-basis point cut in the overnight borrowing rate in the first half.

Asked if a 25-basis point cut could happen as early as the Monetary Board's first meeting for 2020 on Feb. 6, Diokno said: "Maybe, we'll announce when and how much, will depend on the data."

"The Fed pause is an important input, big input to our decision

Diokno slashed a total 75 basis points off the benchmark lending rate in 3 successive meetings this year as inflation cooled and growth momentum recovered.

The BSP governor, who succeeded the late Nestor Espenilla earlier this year, said he was purposely being "transparent" on upcoming policy actions.

"We saw the merit of it, so that we reduce speculation," he said.

Referring to the pause in rate cuts during the BSP's last 2 policy meetings for 2019, Diokno said: "That's appropriate to see how the adjustments are being digested by the markets."

"This is the appropriate course for the markets. This is also being done by other countries," he said.


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Inflation crept up to 1.3 percent in November, the first acceleration in 6 months, but still below the BSP's 2 to 4 percent goal. It soared to near 10-year highs in 2018, prompting the monetary authority to increase the overnight borrowing rate by 175 basis points.

The BSP has so far taken back 75 of the 175-basis point increase in 2018.

The country's gross domestic product grew 6.2 percent in the July to September quarter, regaining momentum after being slowed down in the first half due to the delayed passage of the 2019 budget.