The Monetary Board decided today to implement a further cut of 50 basis points in both the overnight RRP and RP rates to 13.0 percent and 15.25 percent, respectively, effective Monday, 8 January 2001. This brings the reduction in the BSP’s policy rates to a cumulative total of 200 basis points since 4 December 2000. The tiering system shall continue to apply for overnight placements of banks under the RRP window as follows: 13.0 percent for placements of up to P5 billion, 11.5 percent for the next P5 billion and 10.0 percent for placements in excess of P10 billion.
The Monetary Board views the turbulence in the foreign exchange and domestic stock markets during the first few days of this year as temporary. The board noted that the restoration of stability in the foreign exchange and stock markets—as market players focus on the underlying fundamentals of the economy—along with improved prospects for the resolution of the political crisis have allowed room for the BSP to implement its commitment to reduce further its policy rates. Moreover, the recent 50-basis point interest rate cut by the US Fed on 3 January 2001 and the market’s view that another rate cut is just around the corner reinforce the BSP’s monetary policy easing stance.
Looking ahead the Monetary Board underscores the need for continued vigilance in monitoring the evolving economic situation as guide in the formulation of monetary policy. In particular, monetary authorities will continue to assess carefully any build-up in inflationary pressures arising from the impact on the real sector of the exchange rate pass-through, oil price hikes, wage adjustments as well as the fiscal deficit.