By Chino S. Leyco
President Rodrigo R. Duterte’s representative on Monetary Board of the Bangko Sentral ng Pilipinas (BSP) believes there could be some room to further lower the key interest rate before the year ends depending on inflation.
Finance Secretary Carlos G. Dominguez III said the seven-man rate-setting Monetary Board, chaired by BSP Governor Benjamin E. Diokno, would look again at inflation and interest rates during their two remaining meetings for this year.
On Tuesday, Diokno said there would be no more policy rate cut this year after they trimmed the benchmark interest rates by 25 basis points for the third time this year last September.
The central bank’s overnight reverse repurchase, as well as overnight deposit and lending currently stand at four percent, 3.5 percent and 4.5 percent, respectively.
“You know the central bank looks at inflation and interest rate, if he says that, well, we will look at it. I’m sure he will look at it again,” Dominguez told reporters when asked if he shares the same assessment of the BSP chief.
Dominguez, who sits as the government representative on the Monetary Board, said they have one meeting each for the months of November and December where inflation guidance could point to a different direction.
Last week, Finance Undersecretary Gil S. Beltran said the BSP has extra room to further reduce its key interest rates following the significant slowdown in the rate of increase in consumer prices in September.
Beltran, the Department of Finance’s chief economist, said the 0.9 percent inflation last month signalled the possibility of another 25 basis points cut in the central bank’s policy rates to stimulate the country’s economy currently below government’s target.
“For the rest of the year, assuming month-on-month price growth of at most 0.2 percent as in September, monthly inflation will be likely still below one percent in October before making upward corrections in the final two months,” the finance official said.
Dominguez also said that the BSP has “still a lot, we have a lot of leeway to go” lower banks’ reserve requirement ratio (RRR) presently at 15 percent for big banks, five percent for thrift banks and three percent for rural and cooperative banks.
Diokno earlier said the BSP may decide before January next year to cut further banks’ RRR that he plans to reduce to a single-digit level by the time he ends his term as governor in 2023.
The RRR cut immediately releases about P90 billion to P95 billion in liquidity to the local financial market for every one percentage point reduction in the ratio.