New BSP chief wants to hasten cut in banks’ reserve requirement ratio
Credit to Author: The Manila Times| Date: Wed, 06 Mar 2019 04:44:35 +0000
NEWLY-appointed Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno on Wednesday wants to accelerate the reduction of banks’ reserve requirement ratio (RRR) following the lowering of inflation rate, which was expected to settle within government’s target range of 2 percent to 4 percent this year.
Speaking to reporters at his weekly “Breakfast with Ben,” Diokno vowed to continue the policies initiated by his predecessor, the late BSP governor Nestor Espenilla Jr., including the reduction of the banks’ RRR to a single-digit level.
“Perhaps we can expedite the reduction of the reserve requirement, kailangan din naman yun, policy din naman yun ni Nesting (that is necessary, that is also a policy of Nesting),” Diokno said, referring to Espenilla.
“Mataas talaga yun (It’s really too high), because basically it’s a tax on banks. At saka (Also, [we will look at]) the timing, when, kasi meron pang possible recession di ba (because there’s a possible recession),” he 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.
The policy-making Monetary Board of Bangko Sentral made a one-percentage point cut in the reserve requirement ratio of banks from 20 percent to 19 percent in February 2018.
The regulator followed it up with another one-percentage point cut in May 2018 from 19 percent to 18 percent.
Diokno said the BSP remained committed to retain its 2 to 4 percent inflation target, calling it “unfortunate” that “inflation was higher than our plan.”
Inflation ceased to 3.8 percent in February, settling within the BSP’s 2 to 4 percent goal.
The result ended an 11-month run of above-target outturns beginning March last year, when consumer price growth first breached the 2-4 percent goal and then steadily moved upwards, hitting a nine-year high of 6.7 percent in September and October.
In a statement, the central bank said “the latest inflation outturn further affirmed the BSP’s projections that average inflation was expected to fall within the government’s 2-4 percent target range in 2019 and 2020, highlighting the abatement of supply-side pressures in 2018.”
“The BSP will continue to keep a close watch over possible emerging risks to the inflation outlook to ensure that the monetary policy stance remains appropriate,” the BSP said. CATHERINE S. VALENTE
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