BSP chief: There is scope to cut rates by 50 bps in one meeting

MANILA, Philippines — The Bangko Sentral ng Pilipinas could slash key interest rates by as much as 50 basis points in a single move, but the BSP would have to see risks of a hard landing before considering doing so.

“I think there is,” BSP Governor Eli Remolona Jr. said in response to a question about whether the BSP could cut rates by 50 basis points in one meeting. “But usually, you’re worried about a hard landing when you consider 50 basis points.”

Speaking on the potential consequences of such a large cut, the BSP chief emphasized caution, suggesting that the central bank may prefer a more measured approach.

“If there’s no risk of a hard landing, 25 basis points (in October) and 25 basis points (in December) for now. 25 basis points is normal. If 50 basis points, you’re a little worried that there might be a hard landing,” he said.

He also said the Monetary Board would move its policy announcement a day earlier this month, to Oct. 16 (Wednesday) from the original schedule of Oct. 17.

Last month, the Monetary Board cut borrowing costs by 25 basis points to 6.25 percent from the over 17-year high of 6.50 percent.

Prior to the cut, the BSP kept its policy rate steady for six straight meetings since November 2023. Between May 2022 and October 2023, it hiked rates by 450 basis points to tame inflation and stabilize the peso.

Meanwhile, Remolona said it is possible to eliminate the big banks’ reserve requirement ratio (RRR) within his term, or until 2029.

The BSP reduced the RRR of big banks as well as non-bank financial institutions with quasi-banking functions by 250 basis points to seven percent from 9.5 percent.

Likewise, the RRR for digital banks was reduced by 200 basis points to four percent from six percent, while the RRR for thrift banks was cut by 100 basis points to one percent from two percent.

The level of deposits small or rural and cooperative banks are required to keep with the BSP was lowered to zero from one percent. The new ratios will be effective on Oct. 25.