MANILA, Philippines – Newly-installed Philippine Central Bank governor Benjamin Diokno said on Friday, March 8, that there is an opportunity to ease monetary policy, amid decelerating inflation.
In his first press briefing as Bangko Sentral ng Pilipinas (BSP) governor, a more “circumspect” Diokno faced the media on Friday, March 8, far from his usual frank and callous remarks when he was budget chief.
“I think given the decelerating inflation, there’s an opportunity for monetary easing. But as I said, that would be dependent on the data that will be given to us by our technical staff here,” Diokno said.
But he was quick to clarify that the timing was important.
“We will look at those data and make a decision at that time. Now when? At the appropriate time. There will be a policy meeting on March 21st. We will make an announcement at that time,” Diokno added.
Diokno is heading the Bangko Sentral ng Plipinas (BSP) at a time when inflation finally slowed down to 3.8%, after almost a year of settling above the government’s target band of 2% to 4%. (READ: EXPLAINER: Why is the role of Bangko Sentral governor important?)
The BSP hiked interest rates in 2018, raising the overnight reverse repurchase rate (RRP) by 175 basis points to 4.75% to help restrain inflation.
RRP is the rate at which BSP borrows from commercial banks. Raising the rates generally means higher borrowing costs for consumers and would lead to people spending less.
“Risks here and overseas require that the BSP should continue to keep a close eye on developments that could affect the outlook for inflation. As always, our decisions on monetary policy stance will remain data-dependent,” Diokno.
Inflation peaked at an all-time high at 6.7% in September and October 2018, bringing last year’s average to 5.2%.
Diokno was sworn in as BSP chief on Wednesday evening, March 6, and met with the Monetary Board on Thursday, March 7.
“The BSP will sustain its institutional independence, with the Monetary Board acting as a collegial body. We will continue to pursue monetary and financial sector policies that are data-driven, evidence-based, and attuned to the evolving market environment,” he said.
Reserve cuts? Diokno also said the current reserve requirement ratio (RRR) which currently stands at 18% “is still too high.”
The RRR is the amount of cash that a bank can hold. Cutting the RRR gives more cash for banks to use and loan to consumers.
“It’s the highest in this part of the world. There’s an opportunity to do some cuts. But again, it will be based on data, evidence, and what’s the situation at that time. So the timing is important,” Diokno.
Ahead of his meeting with the Monetary Board, Diokno said on Wednesday that he eyes to “expedite” the cut in the RRR.
On Friday, he backtracked and said it’s “not his decision alone” but up to the decision of the 6 other members of the board when to trim it.
“If there’s a decision, there’s no point postponing if you have decided that you are sure that it’s the right thing to do. Do it as soon as possible,” he said.
Diokno was appointed central bank governor on Monday, March 4, taking over the post left by late Nestor Espenilla Jr. Diokno will serve BSP until July 2023. – Rappler.com
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