By means of Luisa Maria Jacinta C. Jocson, Reporter
The Bangko Sentral NG PiliPinas (BSP) can lower the interest rates with 50 basis points (BPS) this Years, said the senior official.
“Seventy -five basic points may be too much, maybe 50 BPS. We need a little policy insurance, “said BSP -Governor Eli M. Remolona, Jr. To reporters on the sidelines of the BSP Media Information Session in Baguio City on Saturday.
Mr Remolona said that this could be supplied in steps of 25 BPS each in the first and second half of the year.
“I think that sounds about good, 25 BPS (in the) first half, 25 BPS (in the) second half. Not every meeting we will See a decrease in policy interest, “he added.
The central bank started its relaxation cycle in August last year and fell the loan costs with a total of 75 BPS against the end-2024.
The monetary board delivered three straight interest rate letings and brought the benchmark to 5.75%.
Mr Remolona said: “There is no need for 100 bps for reductions this year because the country is far from a scenario” hard landing “.
“Central banks all over the world learned to do things gradually, except when there is an approaching hard landing. Hard landing usually means a cut of more than 25 bps. We don’t see a hard landing in the near future, “he said.
On Friday, Mr Remolona said that a rate reduction is still on the table at the first policy assessment meeting of the Monetary Council this year on 13 February.
The BSP chef said that a negative output gorge could lead to further monetary relaxation.
“We currently have a kind of negative starting gap. We grow to a bit under capacity and whether that (growth) number that gap, our capacity and how much we really grow. “
“If the gap gets bigger, if it gets more negative, then it would relax more,” he added.
The Gross Domestic Product (GDP) of the Philippine grew by 5.6% in 2024 and is not in the government’s objective.
In the fourth quarter, GDP growth expanded with a weaker than expected 5.2%, the slowest print since the 4.3% in the second quarter of 2023.
In the meantime, Mr Remolona said that they are also monitoring the movements of the American Federal Reserve, but not seeing the need to necessarily fall in step with the US central bank.
“Of course it influences what we will do because it affects what happens to the economy, what happens to inflation. In that respect it influences what we do, but we don’t copy them. We don’t follow them alone. “
In his January meeting, the FED held the benchmark rental rates unchanged as generally expected, after a full basic point in 2024. This marks the first break since the start of the relaxation cycle in September, Reuters reported.
Rrr -nit
In the meantime, the BSP chef said that this year the central bank is looking at another reduction in the reserve requirement ratio (RRR) of Banks.
The monetary board is noticed to reduce the reserve requirements this year by 200 bps to 5%, he said.
“That is the amount we discuss, 200 BPS. From 7% to 5% for the large banks, “Mr. Remolona said.
This can be delivered somewhere in the middle of the year, he added, probably in June or July.
The Central Bank reduced the RRR for universal and commercial banks and non-banking institutions with quasi-bank functions with 250 bps to 7% of 9.5%, which came into effect last October.
It also reduced the RRR for digital banks with 200 bps to 4% and for lenders with 100 bps to 1%. RRR from the countryside and cooperative banks was also lowered to 0%by 100 bps.
“In a sense, the policy speed is a replacement for reducing the reserve requirements. They have similar effects on the economy … We want to lower it, but the timing is important because we also lower policy interest, ”said Mr Remolona.
“The nice thing about the reserve requirement is that it influences both the deposit rate and the loan interest rate. So it should increase the deposit rate a bit if you lower the reserve requirement while the loan rates are lowered. “
The RRR is the part of the reserves that banks must hold to ensure that they can meet obligations in the event of sudden recordings. When a bank is obliged to have a lower reserve evatio, it has more money to borrow to borrowers.
From a highlight of 20% in 2018, the Central Bank has since brought the reserve requirements to levels with one digit.