NextGen Day

Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) said on Thursday that any reduction in banks’ reserve requirement ratio (RRR) will be based on its necessity in light of the country’s economic recovery.

RRR adjustments are “always on the table,” Diokno said in a virtual briefing, but decisions “will be made in conjunction with the BSP’s broader strategy to normalize monetary policy settings when domestic demand conditions achieve significant recovery from the pandemic.”

“The assessment will be heavily influenced by how liquidity dynamics evolve and how quickly credit activity recovers, to the extent that the inflation and growth outlooks allow,” he said.

Last year, the BSP’s policy-making Monetary Board (MB) slashed banks’ RRR by up to 200 basis points as part of the central bank’s efforts to ensure that economic activity remains stable by increasing financial institutions’ lending liquidity.

Economists expect more RRR cuts as the MB maintains the central bank’s key policy rates after cutting them by 200 basis points last year.

The BSP’s overnight reverse repurchase (RRP) facility rate is currently at a record low of 2%.

“In line with our data-driven approach to monetary policy, operational adjustments to the RR will be made as needed based on data outcomes,” Diokno said.

“As things stand, monetary policy continues to provide ample stimulus to the economy.” And the BSP will be patient in maintaining policy support alongside ongoing fiscal and public health interventions, ensuring that the economic recovery is long-term,” he added.

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