At its meeting today, the Monetary Board decided to maintain the BSP's key policy interest rates at 3.50 percent for the overnight borrowing or reverse repurchase (RRP) facility and 5.50 percent for the overnight lending or repurchase (RP) facility. The interest rates on term RRPs and RPs were also maintained accordingly. The reserve requirement ratios were kept steady as well.
The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable. Latest baseline forecasts continue to track the lower half of the 3-5 percent target range for 2013 and 2014, while inflation expectations also remain firmly anchored. Risks to the inflation outlook also appear to be evenly balanced around the baseline forecast path. Although global economic activity has stabilized in recent months, uncertainty surrounding the ongoing fiscal consolidation and lingering financial market stresses in advanced economies continue to weigh down on global growth prospects, thus mitigating upward pressures on commodity prices. However, pending domestic power rate adjustments and the strong inflow of capital continues to pose upside risks to the inflation outlook. The Monetary Board also noted the solid growth of the economy which is expected to continue.
At the same time, the Monetary Board decided to set the interest rates on the Special Deposit Account (SDA) facility at 3.00 percent regardless of tenor, effective immediately, consistent with the BSP’s continuing efforts to fine-tune the operation of its monetary policy tools. Previously, the SDA rate was priced at a premium over the policy rate. The Monetary Board decided to rationalize the BSP’s SDA facility consistent with international central banking practice. Amid manageable liquidity growth and a benign inflation outlook, the operational refinement in the SDA facility will help enhance the ability of the BSP to ensure that liquidity remains adequate to meet the requirements of the growing economy.
Going forward, the BSP will continue to monitor emerging demand and price developments to ensure that monetary policy settings remain consistent with price stability while being supportive of economic growth. The BSP also stands ready to deploy additional macroprudential measures to address any potential misalignment in asset prices.