The Bangko Sentral ng Pilipinas (BSP) expects to further reduce the reserve requirement ratios (RRRs) next year, according to Governor Eli Remolona Jr.
“Maybe next year, because we’re trying to make the yield curve more reliable, which means managing liquidity in the system better than we have,” Remolona said.
“And that the reserve requirement is a factor in that. So far, we’ve been trying to manage liquidity by issuing our own BSP bills. We’ve been issuing large amounts of BSP bills in an effort to absorb the liquidity in the system,” he said.
Remolona said the reserve requirement cuts would expand liquidity in the system.
“So we’re trying to manage that. We might start issuing BSP bills. An alternative to that is selling the treasury securities that we hold. That has the same effect on liquidity,” he said
The BSP, on Feb. 21, 2025, reduced the RRRs by 200 basis points (bps) for universal and commercial banks (U/KBs) and non-bank financial institutions with quasi-banking functions (NBQBs); 150 bps for digital banks; and 100 bps for thrift banks (TBs).
The reduction brought the RRRs of U/KBs and NBQBs to 5.0 percent; digital banks to 2.5 percent; and TBs to 0.0 percent. The new ratios started on March 28, 2025 and would apply to the local currency deposits and deposit substitute liabilities of banks and NBQBs.
The BSP also signaled to investors and analysts in Milan, Italy that it is considering more interest rate cuts amid a favorable inflation outlook, which supports investment and growth.
“Moving forward, the Monetary Board will be assessing if there is room to continue the shift to a more accommodative stance,” Deputy Governor Zeno Ronald Abenoja said during the Philippine Economic Dialogue (PED) on May 6, 2025.
“It will help support consumption moving forward. It will help investment activities. It will help credit activity to spur and support economic activity,” said Abenoja who was promoted to deputy governor on May 19, 2025. He was assistant governor during the Philippine Economic Dialogue in Italy.
The BSP cut its policy interest rate by 100 basis points starting August 2024 amid a manageable inflation environment. Based on its estimates for this year up to 2027, inflation will stay within the target range of 2 percent to 4 percent.
The BSP joined government economic agencies in promoting the Philippines as a prime investment destination. The country is expected to maintain its position among Asia’s fastest-growing economies.
