Bank reserves cut seen to unleash P300 B

The reduction in banks' reserve requirement ratios (RRR) last week will inject over P300 billion in liquidity into the financial system, which would help boost economic growth, analysts said.

- Keisha Ta-asan

In a report written by economists Euben Paracuelles and Nabila Amani, Nomura Global Markets Research said the impact of the recent RRR cut by the Bangko Sentral ng Pilipinas (BSP) will be substantial compared to the last RRR cut in June 2023.

"We estimate the impact of the 250-basis-point RRR cut to be a liquidity injection of around P310 billion to P330 billion," Paracuelles and Amani said. This is around 1.2 percent of fullyear 2024 gross domestic product.

They said the impact on money supply growth was relatively muted last year as it was intended to coincide with the expiration of some pandemic-linked measures.

Central bank instruments such as the term deposit facility will be used more actively to absorb excess liquidity under the BSP's interest rate corridor framework, the Nomura economists said.