BSP slates another 100 bps RRR cut

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said it would further lower the reserve requirement ratio (RRR) by another 100 basis points as it is unlikely to step on the brake pedal for its easing cycle even after the attacks on the oil production facilities in Saudi Arabia.

BSP Governor Benjamin Diokno told reporters during the launch of the PayMaya QR (quick response) system at the reopening of one of the McDonald’s stores in Bonifacio Global City, monetary authorities could slash the reserve requirement ratio by 100 basis points.

 “The next cut might be 100 basis points. It is an active issue, so we can discuss it anytime,” Diokno added.

The BSP has so far lowered the RRR level for big and mid-sized banks by 200 basis points in three tranches from May to July and for small banks by 100 basis points in May, freeing up about P210 billion to boost economic activity.

About P90 to P100 billion worth of funds are released into the financial system for every 100 basis points reduction in the RRR level.

Just like the previous reduction, Diokno said the effectivity of the planned RRR cut would be in tranches.

Likewise, Diokno said the Monetary Board is still likely to push through with its easing cycle via another rate cut in its next rate-setting meeting scheduled on Sept. 26 on concerns that the attacks in Saudi Arabia’s oil fields could put upward pressure on inflation.

“No change, no change,” Diokno said referring to the statement he made during the signing of an agreement with the Bases Conversion and Development Authority (BCDA) on the new currency production facility at the New Clark City in Capas, Tarlac that the next monetary action via rate cut or lowering of RRR could come as early as September.

Diokno said inflation is seen settling within the BSP’s two to four percent target range as oil prices do not breach the $85 per barrel level. “Oil price rise is not yet a worry. For as long as it won’t breach $85 per barrel for consecutive weeks, inflation will remain within target,” he said.

According to Diokno, oil prices could be back to normal in the next few weeks.

Oil prices rose by more than 14 percent to over $69 per barrel as the attacks knocked out almost half of Saudi Arabia’s oil capacity, but dropped sharply to about $65 per barrel.