The Monetary Board decided today to cut further by 50 basis points the overnight RRP and RP rates to 11.5 percent and 13.75 percent, respectively, effective Monday, 5 February 2001. This marks the fourth policy rate cut since the beginning of this year and brings the reduction in the BSP’s policy rates to a cumulative total of 350 basis points since 4 December 2000.
The Tiering system shall continue to apply for overnight placements of banks under the RRP window as follows: 11.5 percent for placements of up to P5 billion, 10.0 percent for the next P5 billion and 8.5 percent for placements in excess of P10 billion.
In making this decision, the Monetary Authorities took into account a number of factors bearing on the future trend of inflation. In addition, the monetary easing bias of the US FED as demonstrated by the successive 50-basis point cut in interest rates on 3 and 31 January 2001 also provided room for a further cut in the BSP’s policy rates.
A reduction in the BSP’s policy rates can help propel the country’s economy’s growth momentum. The extent of policy rate cuts will be calibrated vis-à-vis developments in the financial and fiscal sectors. Further interest rate reductions would also be considered carefully with a view to observing an appropriate differential with foreign interest rates.
The Bangko Sentral will continue to monitor and assess carefully the risks stemming from possible inflationary pressures coming from aggregate demand and supply conditions.