At its meeting today, the Monetary Board decided to keep the BSP's key policy 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, RPs and special deposit accounts (SDAs) were also maintained. The reserve requirement ratios were held steady as well.
The Monetary Board’s decision is based on its assessment that the inflation environment remains benign. Latest baseline forecasts indicate that inflation will remain within target for 2013 until 2015. Inflation expectations also remain well supported. At the same time, domestic economic growth remains firm, driven by strong internal demand. Ample liquidity and strong bank lending should also continue to support economic activity in the months ahead.
The Monetary Board noted that the risks to the inflation outlook appear evenly balanced. The modest pace of global economic activity could continue to temper the broad outlook for inflation. Meanwhile, potential upside pressures on inflation could arise from power rate adjustments and the upward impact of sustained capital inflows on domestic liquidity.
Keeping policy settings steady also allows time to assess the impact of recent fine-tuning in monetary operations. Recent global financial market developments also support an unchanged policy stance.
On balance therefore the Monetary Board is of the view that the manageable inflation outlook and robust domestic growth provide scope to keep policy settings steady for the time being. Going forward, the BSP will continue to pay close attention to evolving price and output conditions as well as asset market developments to ensure that policy settings remain consistent with safeguarding price and financial stability while being supportive of sustained and balanced economic growth.