Bangko Sentral ng Pilipinas Hikes its Reserve Requirement Ratio

March 27, 2014

Although the Filipino overnight lending and borrowing rates were left at 5.5% and 3.5% as expected, the reserve ratio was tightened to 19% from 18%.  Interest rates were cut four times, each by 25 basis points, during 2012 but not subsequently, and this was the first reserve ratio change since a cut 25 months ago.  A statement released by the monetary authorities predicts in-target inflation but again asserts that price risks will be skewed to the upside of the baseline forecast because of “potential price pressures emanating from pending petitions for adjustments in utility rates and from the possible increases in food and oil prices. The Monetary Board’s decision to raise the reserve requirement is intended to guard against potential risks to financial stability that could arise from continued strong liquidity growth and rapid credit expansion.”

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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