By Luz Wendy T. Noble, September 24 2019; Business World

Image Credit to Philippine Star

BANGKO Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno acknowledged market expectations of further policy easing as “good,” because it means it takes the guesswork out of the bank’s policy action Thursday.

Mr. Diokno said on the sidelines of the Euromoney Philippine Investment Forum in Makati in response to a question about market expectations: “That’s good. That’s good. You don’t have to keep guessing. There will be an announcement on Thursday after the Monetary Board policy meeting.”

Asked whether the monetary board will also move on bank reserve requirement ratio (RRR), he said, “Hindi siguro (Maybe not)… pero yung RRR naman is always in the agenda (but he RRR is always on the agenda). Pwede naming i-announce ‘yun (We can announce it) anytime. Yung RRR walang definite schedule yan. (The RRR has no definite schedule),” he told reporters Tuesday.

An analyst said the central bank has adopted a new approach to signalling rate action in response to flagging growth.

In a note, ING Bank NV Manila economist Nicholas Antonio T. Mapa said the BSP’s new communication policy “puts primacy on transparency as Diokno looks to restore credibility and establish trust with the market through forward guidance.”

“Thus even as BSP embarks on a heroic gambit to boost flagging growth via easing, market reaction has been positive and the peso has been stable. Thursday will see another 25 bps rate cut to the RRP (reverse repurchasing rate) to bolster growth and BSP will announce the fourth quarter RRR reduction schedule, with a pair of 50 bps reductions at the end of October and November,” he said.

According to a BusinessWorld poll, seven out of eight analysts are calling another 25-basis point cut by the Monetary Board, similar to its actions on May 9 and Aug. 8. Those moves reduced RRP, overnight deposit and overnight lending rates to 4.25%, 3.75% and 4.75%, respectively. — Luz Wendy T. Noble