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 Monetary Board's decision is based on its view that current monetary policy settings remain appropriate. Latest inflation forecasts continue to be within the target ranges of 2.5-4.5 percent for 2009 and 3.5-5.5 percent for 2010, with underlying demand and supply pressures generally muted. The favorable inflation outlook reflects the moderate growth of the domestic economy in 2009 and 2010. The recovery of the global economy may also take longer than expected as significant weaknesses linger. Forward-looking indicators show that inflation expectations are well contained while the relatively firm peso could temper price pressures in the near term. The Board noted that, given the favorable inflation outlook, keeping policy rates unchanged could also encourage further investment and borrowing activity.
Moving forward, the BSP will closely monitor risks to the inflation outlook, including a possible upsurge in oil and other commodity prices. The BSP also reiterates its support for non-monetary measures to address supply-side risks to consumer prices and shall continue with its periodic review of policy settings in light of its mandate to safeguard price stability.