Bangko Sentral ng Pilipinas Governor Benjamin Diokno
MANILA -- The unexpected deceleration of domestic inflation rate to 0.8 percent last October, as well as the November 2019 inflation rate, will be the main factors for the possibility of another cut in the Bangko Sentral ng Pilipinas’ key interest rates (BSP) this month.
BSP Governor Benjamin Diokno’s statement for the possibility of another rate cut was contrary to his earlier statement that the central bank’s policy-making Monetary Board (MB) was done on policy easing for the year.
“When I said that we're done, we're not expecting that inflation will be very low like 0.8 (percent) and 0.9 (percent),” he told journalists Monday night.
Although posting an uptick to 3.2 percent last May from month-ago’s 3 percent rate of price increases sustained its deceleration after peaking at 6.7 percent in September and October 2018.
It slowed to 0.9 percent last September and to 0.8 percent last October, which monetary officials forecast would be the lowest this year as they project the November 2019 figure to stay between 0.9 to 1.7 percent.
The Philippine Statistics Authority is scheduled to announce the November 2019 inflation rate on Thursday.
“We'll look at December and then maybe early January, we'll resume monetary easing,” Diokno said.
To date, the MB has reduced the BSP’s key policy rates by a total of 75 basis points. This, after increasing these by a total of 175 basis points last year to help rein in inflation expectations.
The central bank chief, however, said that while there is a probability of a policy rate adjustment this month, he discounts the same for banks’ reserve requirement ratio (RRR).
“It’s already close because we are already ahead of the schedule,” he said. “We thought (that we will achieve a single-digit RRR by) 2023, but we’re already at 14 percent,” he said.
The MB has slashed big banks’ RRR by a total of 400 basis points this year, with the last 100 percent set for implementation this month.
“We don't know the impact yet but that effectively will release about a hundred billion (pesos),” he added.
The RRR reductions are in line with the central bank’s financial sector reform agenda to promote a more efficient financial system and ensure adequate domestic liquidity in the system. (PNA)
