The Monetary Board decided today to leave the BSP’s policy rates unchanged at 11.0 percent and 13.25 percent for the overnight RRP and RP rates, respectively.
The successive reductions in the BSP’s policy rates since December 2000 have been aimed at steering the economic recovery towards a sustained path. The 400-basis points cumulative reduction in policy interest rates since 4 December 2000 must be allowed to work its way through the system. This is because it takes time for policy interventions to work itself throughout the economy because of the lags in monetary policy.
If the inflation outlook continues to be benign and if stability in the financial markets, particularly in the foreign exchange market, is sustained, then there is greater scope for a more accommodative stance of monetary policy.
Accordingly, the Bangko Sentral will take its cue from financial markets and other economic indicators as well as further rate moves of the US Fed before effecting any further reduction in its policy rates. The BSP will thus remain watchful over developments in the financial and fiscal sectors and will stand alert against inflation threats.