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BSP Maintains Monetary Policy Stance

08.23.2007

At its meeting today, the Monetary Board decided to maintain the BSP’s key policy interest rates at 6.0 percent for the overnight borrowing or reverse repurchase (RRP) rate and 8.0 percent for the overnight lending or repurchase (RP) rate.

In its decision to maintain policy settings, the Monetary Board considered the benign inflation outlook and noted that the balance of risks to future inflation has remained essentially unchanged. With the additional monetary measures in place, the growth of domestic liquidity moderated in May and June. Rainfall conditions have normalized in most of Luzon and the approved wage hike for NCR is not expected to generate additional inflationary pressures.  At the same time, demand pressures—while on a broadly strengthening trend—continue to be limited.  The relatively firm peso also serves to temper price pressures.  Inflation expectations also remain subdued, suggesting that markets are confident about the BSP’s anti-inflation resolve.  Given the policy moves implemented in May and July, the Monetary Board decided to keep policy settings steady to give more time for the recent measures to work their way through the system.

The Board discussed the recent turmoil in global financial markets and noted that this would have a limited impact on the domestic financial system.

Going forward, the BSP will continue to closely monitor monetary and financial developments to ensure price stability and the sustained growth of the economy.

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