Former Budget Secretary now BSP Governor Benjamin E. Diokno. (File photo from the Philippine Daily Inquirer)
MANILA, Philippines–The Philippines’ new central bank chief — on his second day on the job, Friday — said he prefers to wait for fresh data to confirm that the inflation rate is indeed on a downtrend before pushing for a reduction in interest rates or bank reserve requirements.
In his first press briefing as the country’s top financial regulator, Bangko Sentral ng Pilipinas Gov. Benjamin Diokno softened his aggressive pro-monetary easing rhetoric aired earlier in the week immediately following Malacañang’s announcement of his appointment.
“I did not make those statements right here, right? I made those statements in my other capacity [as the former Budget Secretary], remember that?” he said when asked about his comments last Tuesday saying that “BSP’s role is to ensure steady, strong growth” in addition to its traditional task of fighting inflation and, to achieve this, “monetary policy has to be in sync with fiscal policy.”
Diokno stressed that, while he still believes that Philippine banks’ reserve requirements — currently at 18 percent of their total deposits, the highest in the region — should be reduced sharply, the timing of any such moves would be determined together with the six other members of the BSP’s Monetary Board.
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“Our policy will be determined by a clear analysis that will be data driven and evidence based, and it will be decided on by the board,” he said. “I cannot, on my own, decide on the cut of the reserve requirement. But that will be taken up by the board as a collegial body.”
Last year, the central bank reduced banks’ reserve requirement ratio by 200 basis points, freeing up almost P200 billion in cash that could be used more productively as loans by financial institutions.
