Executive Secretary Ralph G. Recto is set to recommend his successor as the government’s representative on the powerful seven-member Monetary Board (MB) of the Bangko Sentral ng Pilipinas (BSP), naming newly appointed Finance Secretary Frederick D. Go for the influential post.

Recto, who recently stepped down as finance chief to take the executive secretary role, indicated he plans to remain on the MB until the end of the year to ensure a smooth transition.

This plan allows Recto to participate in the MB’s final policy review of the year, scheduled for Dec. 11.

“I will probably remain government representative at MB until end December,” Recto told the Manila Bulletin on Tuesday, Nov. 25.

He added that he will officially recommend Go, who replaced him at the Department of Finance (DOF), to be President Ferdinand Marcos’ representative on the board.

“It is important to align fiscal and monetary policy,” Recto said.

The government representative on the MB is a crucial position, acting as the bridge between fiscal policy and monetary policy

The MB is the policy-making body of the BSP, responsible for setting the nation's key interest rates, managing foreign currency reserves, and supervising the financial system.

However, Recto’s recommendation of Go is an expected move, as the finance secretary traditionally holds the government seat on the board.

To date, the MB has delivered a cumulative 1.75 percentage points (ppt) in interest rate cuts since the body kicked off its inflation-targeting easing cycle in August last year. The series of reductions has brought key borrowing costs down to 4.75 percent.

Recent reductions in the key policy rate took into account moderating economic growth, which slowed sharply in the third quarter of the year to 4 percent—its weakest performance in 4.5 years.

As of end-October, the Philippines’ gross international reserves (GIR)—the country’s stock of United States (US) dollars and other foreign currencies—hit its highest level in a year at $109.7 billion, driven by fresh highs in the country’s gold reserves.

This level, the BSP said, provides a “robust” external liquidity buffer, enough to cover 7.3 months’ worth of imports and payments for services and income.

On Monday, Nov. 24, BSP Governor Eli M. Remolona Jr. said that the MB could further lower the five-percent reserve requirement ratio (RRR) for commercial and universal banks but asserted that “there is no urgency in adjusting” the current level.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the likelihood of Go joining the board would bring a different level of diversity, as the new finance chief comes from the business sector.

Ricafort said this would “bring additional perspectives on business and the economy.”

He expects the incoming MB member to focus “on monetary policy space to provide the support the economy needs amid recent slower gross domestic product (GDP) growth, while also balancing the need to manage inflation, which has remained benign so far.” Inflation steadied at 1.7 percent in both October and year-to-date, remaining below the government target band of two to four percent.