Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. is considering reducing its holdings of United States (US) Treasuries following Moody’s Ratings downgrade of the US’ credit rating.

“We’re looking at it,” Remolona said during a press briefing on Friday, May 23, when asked if there is a chance that the BSP is considering trimming its US Treasury holdings.

Remolona noted that unlike downgrades in other countries, the US Treasury downgrade has a larger impact on the Philippines. “It’s one thing when other countries’ debt is downgraded. But the US Treasury’s downgrade, that’s a big thing.”

According to the central bank governor, US Treasuries remain the “most liquid market,” adding that the “dollar is still the number one currency in terms of international lending and borrowing, in terms of investments.”

“So it’s likely to remain a very important part of our reserves,” Remolona further said.

Dollar-denominated assets make up about 80 percent of the country’s foreign reserves, which totaled $104.6 billion in April.

Remolona said there is still “plenty” room for the BSP to cut the benchmark interest rate, given expectations that inflation will stay low in the coming months. He noted that two more rate cuts are likely this year.

To recall, Moody’s downgraded the US’ credit rating from Aaa to Aa1, citing concerns over the rising costs of financing the federal budget deficit and managing existing debt amid higher interest rates.