The Monetary Board will continue to be data-dependent in deciding when to resume the reduction in reserve requirement ratios of banks which is one of the highest in the region, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday.
Diokno, in his first briefing at the Bangko Sentral as its fifth governor, said he considered the reserve requirement in the Philippines “still too high.”
“As I said, our policy will be determined by analyses, evidenced-based, and will be decided upon by the board. I cannot on my own decide on the cut in the reserve requirement but (it) will be taken up by the board,” Diokno said.
“As you know, we have a well-represented and a very wise board, and old board. So we will decide based on the data, evidence and situations. In my capacity, I said the reserve requirement is still too high,” Diokno said.
The reserve requirement, or cash reserve ratio, is a central bank regulation employed by most, but not all, of the world’s central banks, that sets the minimum amount of reserves that must be held by a commercial bank.
In February 2018, the Monetary Board made a one-percentage point cut in the reserve requirement of banks from 20 percent to 19 percent.
The board said the operational adjustment would support the Bangko Sentral’s shift toward a more market-based implementation of monetary policy as well as its broad financial market reform agenda.
The regulator followed it up with another one-percentage point cut in May 2018 from 19 percent to 18 percent. The two RRR cuts were made outside the scheduled policy meetings.
Diokno said the timing for the next RRR cut was very important.
Diokno also said amid the deceleration in inflation, there might be a room for monetary easing but just like what he said, it would always be data-dependent.
“We will make a decision based on the data. We will announce it at a proper time,” he said. The board is set to hold its next policy meeting on March 21.
Diokno also assured the BSP “will sustain its independence,” with the Monetary Board existing as a collegial body.
Deputy Governor Diwa Guinigundo said the board was closely monitoring the global economic conditions and the policy movements of the US Federal Reserve, European Central Bank and Bank of Japan.
“If there is a global economic slowdown, there could be policy easing in advanced economies to counter this slowdown. We could see some reflow of capital to emerging markets,” Guinigundo said.
“Between now and March 21, anything can happen,” Guinigundo said, adding that important data could be available during that period, which could be very vital to the next move of the Monetary Board.