07.09.2009 At its meeting today, the Monetary Board decided to reduce the BSP's key policy interest rates by 25 basis points to 4 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6 percent for the overnight lending or repurchase (RP) facility, effective immediately. The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were reduced accordingly. This is the sixth time since December 2008 that the BSP has cut its policy interest rates.
The Monetary Board reduced policy rates further based on the latest baseline forecasts showing average inflation keeping within the target ranges for 2009 and 2010. Given prevailing downside pressures on prices and output due to the impact of weaker global economic activity on domestic demand, the reduction in policy rates will support economic activity as banks are expected to pass on the lower borrowing costs to clients.
The Monetary Board reiterated its resolve to provide support to economic activity to the extent that the inflation outlook allows. At the same time, the Monetary Board noted that significant monetary easing has already taken place since December 2008, with key policy rates being reduced by a total of 200 basis points and liquidity provision being undertaken through lower reserve requirements, a larger rediscounting budget, and easier access to the rediscounting facility. With considerable monetary stimulus already in place, and the impact of fiscal action already in the pipeline, the Monetary Board believes that prevailing monetary settings are appropriately calibrated to the outlook for inflation and domestic demand. Going forward, the Monetary Board will continue to pay close attention to signs of global demand recovery as well as to possible build-ups in commodity price pressures over the medium term, with a view to undertaking timely action towards a non-inflationary recovery in economic activity. |
