Diokno also said the country’s reserve requirement ratio (RRR) for banks, currently 18%, should be reduced to a single digit before his term ends in 2023.

The governor said the central bank is looking at reducing the RRR and the rate on its overnight reverse repurchase facility this year, but policymakers have yet to decide which will come first.

“Those two are inevitable, reduction of the rates and reduction of the reserve requirement. They will come. It is just a matter of time”, Diokno told a business forum.

In his remarks to the forum, the governor did not give a timeframe. When asked later by reporters about the timing, Diokno said “this year” but added that he does not know “the sequencing”.

Slowing economic growth

The level of required reserves for Philippine banks was cut twice last year in line with a medium-term plan to bring the ratio to a single digit and help bolster the economic growth rate, which is slowing.

Some economists expect the central bank to resume cutting the RRR and reverse some of last year’s policy tightening as early as its next policy meeting on May 9.

The Philippines remains one of Asia’s fastest-growing economies – it had 6.2% growth in 2018 – but policymakers had to grapple with soaring inflation and raised its benchmark interest rate by 175 basis points to 4.75% to slow the pace.

“As things normalise, naturally we should move towards normalisation'” Diokno said.

Annual headline inflation, which hit a near-decade peak of 6.7% in September and October, is back inside the central bank’s 2-4% target this year as food and fuel prices have started to ease.

In March, Diokno was appointed to complete the six-year term of Governor Nestor Espenilla, who died in February of cancer.