Medalla: Single-digit RRR still possible by July 2023

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said thereserve requirement ration (RRR) of big banks could still be cut down to single-digit by the end of his term in July, should inflation be expected to fall within the target range by then.

In an interview with reporters, Medalla said the possibility of single-digit RRR — a target which was previously set by his predecessor former Governor and now Finance Secretary Benjamin Diokno — could still be realized by the end of his term in July 2023.

“Kung mangyari ‘yung scenario na sinasabi ko na narating na natin, very clear na sa atin, klarong klaro na sa direksyon ng inflation na mararating na natin ‘yung below four (percent), we may actually cut it before the end of June. Cutting it near the end of the first semester of the next year is still a possibility,” he said in Pasay City.

[If the scenario I’m talking about happens that we have already reached, it is already clear that the direction of inflation reaches below 4 (percent), we may actually cut it before the end of June. Cutting it near the end of the first semester of the next year is still a possibility.]

The reserve requirement is the amount of cash a bank must hold in its reserve against deposits made by customers in the Philippines. It is currently at 12%, said to be among the highest in the region.

“We don’t want to confuse the markets. We don’t want to be raising rates and cutting RRR. Diba gumulo masyado nung ginawa namin ‘yun [Right, it got messed up when we did that], ” Diokno said.

“In reality, we should be able to do that because all we have to do is borrow more to mop up the liquidity cost by the RR cut, but to avoid confusing the market. It has to wait when we’re no longer in an increasing mode,” he added.

Medalla is currently serving the unexpired term of his predecessor former Governor and now Finance Secretary Benjamin Diokno, who also took over the rest of the term of late former Governor Nestor Espenilla, Jr. who passed away in February 2019.

Espenilla in 2017 said he personally wanted to see that the reserve requirement be cut by half under his leadership. —NB, GMA Integrated News