Adjustment of interest rates, untimely drop in RRR: BSP
MANILA – Rising key borrowing rates and reducing bank reserve requirements right now are “inappropriate” and would be counterproductive in fostering economic growth, Bangko Sentral Governor Benjamin Diokno said on Monday.
The BSP policy rate, used by banks to price loans, is currently at an all-time high of 2%, while bank reserve requirements are at 12%.
“The economic recovery is only in its early stages. It needs to be nurtured, not stifled. We need to support it and raising the interest rate right now is not the right thing to do. It could be against it. -productive, âDiokno said. .
“Although I pledge to reduce the RRR to one figure before the end of my mandate which is in 2023, reducing it now is inappropriate and unjustified,” he added.
Diokno said earlier he would reduce the country’s RRR, once among the highest in the region, to single digits before his term ends.
The BSP reduced reserve requirements by 200 basis points (bps) in 2020, injecting more liquidity into the system.
âThere is still a lot of liquidity in the system. If there comes a time when the financial system needs more liquidityâ¦ this is the time when we might consider reducing the RR,â Diokno said.
A strong economic recovery is expected in the second quarter, but the 2-week lockdown could affect economic growth in the third quarter, he said.
Socio-economic Planning Secretary Karl Kendrick Chua said the estimated weekly economic losses in Metro Manila could be 150 billion pesos higher than the previous estimate of 105 billion pesos.
The two-week lockdown imposed in Metro Manila from Aug. 6-20 could affect 600,000 workers and likely increase the number of poor by around 250,000, Chua said.
A new strict lockdown cycle has been imposed to contain the growing number of COVID-19 infections and the emergence of the new Delta variant.
Despite the headwinds, the economy could still grow “maybe around the target” of 6%, Diokno said. GDP could grow 7.7% in 2022 and 6.5% in 2023, he added.