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Philippines: BSP pauses policy easing
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) announced a pause in monetary easing to assess the impact of the aggressive actions it implemented to mitigate economic and financial fallout from the coronavirus disease 2019 or COVID-19 pandemic.
BSP Governor Benjamin Diokno said it is prudent for the Monetary Board to first evaluate if the previous actions they have taken have been absorbed by the economy.
“Clearly, the more benign inflation provides the Monetary Board greater room for easing. However, since monetary policy works with a lag, it would be prudent on the part of the Monetary Board to see how the aggressive policy measures it has adopted have been absorbed by the financial system,” Diokno said.
The BSP expects inflation to range from 1.9 to 2.7 percent in April. The consumer price index settled at 2.7 percent in the first quarter of the year after easing further to 2.5 percent in March from 2.6 percent in February.
Diokno said the benign inflation environment gives BSP more room for further monetary easing.
Diokno said the scheduled rate setting meeting of the Monetary Board on May 21 has been cancelled due to the off-cycle rate cut last April 16.
The BSP has cut interest rates by 200 basis points since May last year, reversing a tightening cycle that saw rates jump by 175 basis points.
It also lowered the reserve requirement ratio by 200 basis points on March 30, releasing about P200 billion to boost liquidity and provide more funds for borrowers.
The BSP has committed to bring down the level of deposits banks are required to keep with the central bank to single digit by the middle of 2023. It has so far slashed banks’ reserved requirement ratio (RRR) by 800 basis points to 12 percent from a high of 20 percent in early 2018.
Aside from the rate and RRR cuts, the BSP also implemented liquidity-provision measures, including the purchase of government securities in the secondary market, the reduction in the overnight reverse repurchase as well as term deposit auction volumes, the P300 billion repurchase agreement with the Bureau of the Treasury (BTr) as well as the counting of micro, small, and medium enterprises (MSME) loans as part of reserves.
It also launched several temporary regulatory and rediscounting relief measures including temporary reduction to zero in the term spread on the peso rediscounting loans relative to the overnight lending rate, time-bound relaxation of various regulations pertaining to compliance reporting, calculation of penalties on required reserves, temporary increase in single borrower limits to 30 percent from 25 percent, among others.
Source: https://www.philstar.com/business/2020/05/05/2011781/bsp-pauses-policy-easing