BSP gov sees scope for off-cycle rate hike

September 29, 2023 - 11:52 AM
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BSP building
Facade of the Bangko Sentral ng Pilipinas in Manila. (BSP/Released)
  • BSP chief sees “a little bit of scope” for off-cycle move
  • BSP chief says RRR to be cut but not the right time yet

 The Philippine central bank is not ruling out the possibility of an interest rate hike even outside the usual schedule for reviewing monetary policy settings, its governor indicated on Thursday.

There is “a little bit of scope” for an off-cycle rate hike, Bangko Sentral ng Pilipinas Governor Eli Remolona told reporters. “It’s possible depending on the numbers.”

Remolona has been sending hawkish policy signals, having said last week that a hike was on the table at the BSP’s rate-setting meeting in November.

The BSP on Sept. 21 kept its Target Reverse Repurchase (RRP) Rate PHCBIR=ECI steady at 6.25%, for a fourth straight meeting, after a series of hikes from May last year to March this year to curb inflation pressures.

Remolona, speaking in an economic briefing, also said the BSP will further reduce banks’ reserve requirement ratio (RRR) when the time is right, though now is not yet the time as the central bank is still in a tightening cycle.

The BSP cut the RRR in June by 250 basis points for big banks and non-bank financial institutions to 9.5% to ensure stable domestic credit conditions as pandemic-related liquidity-enhancing relief measures expired.

“It is not low enough. 9.5% puts us among the highest in Asia, or among our neighbors,” Remolona said. “It (high RRR) drives a wedge between lending and deposit rates unnecessarily.”

— Reporting by Neil Jerome Morales; Editing by Kanupriya Kapoor and Ros Russell