RRR CUT. Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. Remolona said Thursday (Sept. 28, 2023) that a further cut in banks' reserve requirement ration would likely be in 2024. In June, the BSP slashed the RRR by 250 basis points to 9.5 percent. (PNA file photo)
MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said a further cut in banks' reserve requirement ratio (RRR) is "off the table" for this year.
“For 2023, yes, it's (RRR) off the table. Maybe the soonest will be 2024, when the time is right,” Remolona said on the sidelines of the EagleWatch economic briefing held at the Makati Sports Club late Thursday.
In June, the RRR of universal and commercial banks, and non-bank financial institutions with quasi-banking functions were slashed by 250 basis points to 9.5 percent.
However, Remolona said the 9.5 percent is not low enough.
"9.5 percent puts us among the highest in Asia, or among our neighbors," he said. "The reason we had such a high reserve requirement is when we were still very old school, it was a way to control money supply. Nobody does that anymore. Right now, it’s just a distortion in financial intermediation, it drives a wedge between lending and deposit rates unnecessarily."
Asked to comment if there is a scope for an off-cycle rate hike, Remolona said "there is a little bit."
"A little bit of scope is possible depending on the numbers. The next one comes out (Oct. 5) but you know, one number doesn't make for a policy hike," he said.
The BSP's Monetary Board has so far maintained policy rates for four consecutive meetings.
The target reverse repurchase (RRP) rate was maintained at 6.25 percent.
The BSP hiked policy rates by a total of 425 basis points since last year to bring down inflation.
As of August, headline inflation picked up to 5.3 percent from 4.7 percent in July.
Official September 2023 headline inflation data will be released by the Philippine Statistics Authority next week. (PNA)
