At its meeting today, the Monetary Board decided to keep the BSP’s key policy interest rates steady at 4 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6 percent for the overnight lending or repurchase (RP) facility. The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were also left unchanged. The decision to maintain the monetary policy stance comes after a series of policy rate cuts since December 2008 totaling 200 basis points and other liquidity enhancing measures.
The Monetary Board decision to maintain policy rates is based on its assessment that current monetary settings are appropriate and that inflation is expected to remain within target over the policy horizon. Since the transmission of monetary policy actions on the real economy works with a lag, maintaining current policy settings will allow the substantial monetary stimulus undertaken earlier to fully work its way through the system. A pause will also allow more time for the authorities to consider incoming data on the balance of risks to inflation and growth as well as the likely trend of future economic activity, given the impact of other public policies. While the current inflation outlook remains favorable, the expected global economic recovery may cause upward pressure on oil and other commodity prices.
The Monetary Board is committed to maintain an appropriate monetary policy stance conducive to credit and investment growth, to the extent that the inflation outlook would allow. Going forward, the Board will continue to be guided by economic data, both domestic and external, paying close attention to the emerging risks to the inflation outlook as well as to indications of the strength of economic activity.