At its meeting today, the Monetary Board maintained the BSP’s key policy interest rates at 7.5 percent for the overnight borrowing or reverse repurchase (RRP) rate and 9.75 percent for the overnight lending or repurchase (RP) rate.
The Monetary Board noted that there is evidence to support the maintenance of policy settings. The recent easing of foreign crude oil prices and the appreciation of the peso imply reduced cost-push pressures in the near term. There are continuing soft spots in the economy, based on various indicators of employment, demand and bank credit.
However, the Monetary Board is of the view that the risks to inflation still remain. While showing some easing, domestic liquidity still remains high. Overall conditions for inflation and output may require a preemptive monetary response. In particular, potential shifts in the public’s inflation expectations continue to be a major policy concern given the possibility of a sustained deviation from the government targets until 2007.
Looking ahead, the Monetary Board will continue to monitor closely the evolving conditions for consumer prices, aggregate demand, domestic liquidity and other factors in order to determine the appropriate stance of monetary policy. The Monetary Board remains committed to the BSP’s inflation objectives and stands ready to take the necessary action to protect the Government’s inflation targets.