BSP chief says interest rate cut to come before easing the reserve requirement

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno on Wednesday hinted on the possibility of reducing the reserve requirement ratio further, but noted that a cut in interest rates will have to first be in place.

“Palagay ko mauuna ‘yung interest rate cut bago mag-reserve requirement,” he told reporters on the sidelines of the 2019 Awards Ceremony for BSP Stakeholders at the central bank headquarters.

He was asked if a further cut in the reserve requirement ratio—the amount of cash a bank must hold in reserve against deposits made by customers—could be cut further in the coming months.

The policy-setting Monetary Board decided to reduce the RRR by 200 basis points to 16% in May, which will fully take effect on July 26.

In terms of key rates, the overnight borrowing rate is at 4.5%, with the overnight lending rate at 5.0%, and the overnight deposit rate at 4.0% after the central bank lowered policy rates by 25 basis points.

Diokno has said there is a lot of policy space to accommodate policy adjustments, considering the global trend in monetary easing.