By SIEGFRID ALEGADO
and TORU FUJIOKA
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno pledged to cut interest rates further and lower the required reserve ratio (RRR) for lenders to support the economy as inflation pressures ease.
“We have more room for monetary easing,” Diokno, 71, said in an interview with Bloomberg TV’s Stephen Engle in Tokyo. “I can promise more cuts,” but the timing will depend on upcoming economic data, he said. The governor said he also wants to lower the ratio of deposits banks must hold as reserves to “single digits” by the end of his term.
Since taking office in March, Diokno has cut the benchmark rate by 25 basis points and announced a phased reduction in the reserve requirement ratio for banks, reversing some of the monetary tightening last year. Inflation has eased to the midpoint of a 2% to 4% target while economic growth slowed to a four-year low.
Diokno sees inflation cooling to below 2% as early as next quarter on base effects, while economic growth this year will reach at least 6%, the lower end of the government’s 6%-7% forecast range. A full-blown trade war between the US and China will have little effect on the Philippine economy, he said.
Analysts are betting BSP will continue cutting interest rates and the RRR this year as inflation eases. Consumer-price data is scheduled for release next week, while the central bank will meet to decide on monetary policy on June 20.
Policy easing “is positive for the local economy and financial markets due to greater lending and investment activities,” said Michael Ricafort, an economist at Rizal Commercial Banking Corp. in Manila.
The benchmark Philippine stock index rose as much as 1% to a three-week high on Friday in Manila. The peso was little changed at 52.20 against the dollar.
Asian central banks are shifting to more looser monetary policy to boost their economies, as heightened trade tensions between the US and China weigh on global growth. India has lowered rates twice this year, while the Philippines, Malaysia and New Zealand eased this month.
“If the rest of the world goes cutting or easing, we’ll be accelerating the process of monetary easing,” Diokno said.