Rate, RRR cuts inevitable — Diokno

MANILA, Philippines — The reversal of the tightening cycle and the reduction of the level of deposits banks are required to keep with the central bank are “inevitable,” according to the Bangko Sentral ng Pilipinas.

During the general membership meeting of the Financial Executives of the Philippines (FINEX) BSP Governor Benjamin Diokno said monetary authorities are determining the right timing for the reduction of interest rates as well as the reserve requirement ratio (RRR).

“Those two things are inevitable, reduction of the rates and reduction of the reserve requirement. They will come, it is just a matter of timing,” Diokno said.

The BSP raised rates by 175 basis points in five straight rate-setting meetings between May and November last year to prevent inflation from spiralling out of control.

Diokno also said the BSP is resuming the reduction in the RRR. The BSP aims to bring down the level of RRR to single digit by 2023.

“We have one of the highest reserve ratio in this part of the world. So its clear that we need to reduce that to be more competitive,” Diokno said.

To ensure continuity, Diokno said he has already named a replacement for BSP Deputy Governor Diwa Guinigundo who is scheduled to retire in July. Guinigundo currently heads the BSP’s Monetary and Economics Sector.

“I already announced that there is going to be a change in leadership in the BSP as Deputy Governor Diwa Guinigundo is retiring. I already named his replacement to remove any uncertainty so that is a good signal. Continuity and expertise,” Diokno said.

Francisco Dakila, Assistant Governor and head of the BSP’s monetary policy sub-sector, is set to replace Guinigundo who has served the central bank for more than four decades.