At its meeting today, the Monetary Board decided to maintain the BSP’s key policy interest rates 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 BSP’s policy rates have been kept steady since July 2009.
The Monetary Board’s decision was based on its assessment that inflation remains manageable given favorable economic conditions. Latest baseline forecasts show inflation firmly anchored well within the target of 3.5 to 5.5 percent for 2010 and broadly consistent with the target of 3.0 to 5.0 percent for both 2011 and 2012. Economic growth is proceeding at a robust pace, underpinned by strong domestic demand. Domestic liquidity remains adequate to support economic activity given the steady uptrend in bank lending and continued improvements in domestic financial markets. The Monetary Board thus believes that there is a sound policy balance that is supportive of both inflation control and economic expansion. Risks to the inflation outlook appear to be finely balanced between potential upside and downside pressures. Nonetheless, the Monetary Board will continue to monitor the volatility of global commodity prices and the possibility that existing stimulus measures and quantitative easing programs in advanced economies could generate inflationary pressures over the medium term.
The Monetary Board also noted that the recent run-up in asset prices, driven in part by strong foreign capital inflows, does not appear to pose an immediate threat to financial stability, although it continues to warrant careful attention.
Going forward, the BSP will continue to closely monitor developments that can impact on price stability to ensure that the monetary policy stance remains appropriate and supportive of non-inflationary economic growth.