(Bloomberg) --
The Philippine central bank reduced the amount of funds lenders must hold in reserve, adding more stimulus to the economy one day after cutting the benchmark interest rate.
The reserve requirement ratio for large banks will be lowered by 1 percentage point to 15% in early November, the central bank said in a statement Friday. The move is in line with Governor Benjamin Diokno’s pledge to bring down the ratio, one of the highest in the region, to single digits.
Bangko Sentral ng Pilipinas lowered its benchmark interest rate for a third time this year on Thursday amid slowing inflation and growing risks to global growth. A number of analysts expect another 25 basis-point cut before the end of the year, adding to the fiscal support the government is giving to boost growth from its weakest in more than four years.
“The cut in reserve requirements is in line with the BSP’s broad financial sector reform agenda to promote a more efficient financial system by lowering financial intermediation costs,” the bank said in its statement. “At the same time, the adjustment in reserve requirement ratios is aimed at increasing domestic liquidity in support of credit activity.”
The reserve requirement for thrift banks will be cut to 5% from 6%, and for rural banks to 3% from 4%, the central bank said.
Diokno said in an interview with Bloomberg TV earlier Friday that further changes to the benchmark rate would depend on incoming data. “We’re not committed to whether we’re done or not,” he said.
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