By Joann Villanueva/PNA
MANILA — An official of First Metro Investment Corp. (FMIC) has forecast that the Bangko Sentral ng Pilipinas (BSP) will further relax the reserve requirement ratio for banks, with a possible 2 percent slash in the first half of 2019.
In an interview after the company’s economic briefing Tuesday, FMIC Senior Vice President Christopher Ma. Carmelo Y. Salazar told the Philippine News Agency (PNA) that the initial RRR cut will likely happen in the first quarter of the year.
A major consideration in further reducing the RRR, which to date is among the highest in Asia at 18 percent, is the decline in domestic inflation rate, he said.
The rate of price increases decelerated in the past two months of 2018, to 6 percent and 5.1 percent respectively, after peaking at 6.7 percent in the previous two months.
This, as supply-side factors, particularly the issue on supply of several agricultural products like rice and vegetables, have been addressed with the help of importation and the coming of the harvest season.
In 2018, the central bank’s policy-making Monetary Board (MB) reduced the commercial and universal banks’ RRR by 100 basis points each in February and May in line with the BSP’s goal for a more market-based implementation of monetary policy and continued financial market reforms.
BSP Governor Nestor A. Espenilla Jr. has committed to bring the RRR to single-digit levels before his six-year term ends in 2023.
Salazar said the Board decided to hold more RRR cuts after the 2 percent decline last year when the inflation continued its big jump.
“Now, inflation started to reverse, it has been going down. So it’s something that might allow them to continue with their reserve requirement adjustment,” he said.
The first cut this year may likely be in the first three months of the year while the second would probably be in early second quarter, he said.
Salazar noted that reduction in the RRR “is something that the BSP wants to do even before Governor Espenilla came in.”
“They said that our reserve requirement is highest in the region, so it’s one of the things they want to do to lower that to single digit,” he said.
Salazar said the projected decline in RRR this year will “make us more aligned with the other countries.”
A 1-percent cut in RRR is seen to release about PHP90 billion worth of liquidity into the domestic economy.
This amount will be used by banks to increase their lending to both the corporates and consumers and boosts their loan portfolio, Salazar added.
