No surprises from BSP at this week’s policy meeting, says Diokno


BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin Diokno assured markets that they continue to hold their stance of keeping the monetary policy at record lows, ahead of their monetary policy meeting on Thursday.

“The economic recovery is at its early stages. The second quarter GDP will be announced tomorrow. It has to be nurtured, not nipped at its bud. We need to sustain it and raising interest rates at this time is not the right thing to do. It is counterproductive,” the governor said in a TV interview on Monday.

The BSP has been keeping their monetary policy rates on record lows for the entire year after its aggressive bout to reduce it by 200 basis points in 2020.

Diokno also said he is not keen on reducing further the banks’ reserve requirement ratio (RRR) this Thursday.

“While I am committed to reduce the RRR to single digit before the end of my term, which is in 2023, cutting it now is untimely and not justified. There is still a lot of liquidity in the system. If there comes a time that the system needs more liquidity as a result of strong loan demand, then that is the time when we might consider an RRR cut,” the governor said.

Philippine banks’ RRR is currently at 12 percent.

In its last monetary policy meeting in June, the Monetary Board decided to maintain its monetary policy settings to provide continued support to the economy amid Covid-19 related disruptions.

This is the fifth consecutive time that the Monetary Board retained their monetary policy settings at record lows to support the economy. BSP Deputy Governor Francisco Dakila Jr. also said in the same briefing that the BSP “has space” for monetary policy to be “accommodative as long as necessary” until the BSP sees “stronger and sustainable signs” of economic recovery.

“The Monetary Board believes that sustained monetary policy support for domestic demand should help the economic recovery gain more traction, especially as risk aversion continues to temper credit activity despite ample liquidity in the financial system,” Diokno earlier said.

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