At its meeting today, the Monetary Board decided to increase by 25 basis points the BSP’s key policy interest rates to 6 percent for the overnight borrowing or reverse repurchase (RRP) facility and 8 percent for the overnight lending or repurchase (RP) facility. The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were adjusted accordingly.
In its assessment, the Monetary Board recognized that further measured tightening of monetary policy was necessary given the latest forecasts indicating above-target inflation for both 2008 and 2009. Monetary policy needs to be appropriately tight to stabilize inflation to within the target range over the policy horizon, and to help manage inflation expectations. Moreover, fluctuations in international oil prices continue to pose a major risk to the inflation outlook.
At the same time, the Monetary Board noted that the emerging inflation outlook reflected the recent easing in global food and oil prices. The declining trend in commodity prices should help moderate inflation pressures.
Going forward, the Monetary Board will continue to keep a watchful eye on the balance of risks to the BSP’s price stability objective with a view to implementing appropriate policy actions.