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 left unchanged accordingly. The reserve requirement ratios were maintained as well.
The Monetary Board’s decision is based on its assessment that the inflation environment continues to be benign. Latest baseline forecasts indicate that the future inflation path remains within the target range of 4.0±1.0 percent in 2013-2014 and 3.0±1.0 percent for 2015. The forecasts are supported by well-contained inflation expectations, which remain within target over the policy horizon. The risks to the inflation outlook also remain broadly balanced. Global economic prospects are likely to stay subdued going forward, thus tempering upward pressures on commodity prices. Nonetheless, upside risks to the inflation outlook remain, including pending utility rate adjustments as well as the recent depreciation of the peso.
At the same time, the Philippine economy continues to be robust, supported by favorable domestic demand and buoyant market confidence. Growth in domestic liquidity and bank lending also remains strong, providing solid support to domestic economic activity.
The Monetary Board also considered that financial market volatility persists owing to concerns over the timing of the tapering of monetary stimulus in advanced economies, and this suggests caution in assessing the policy stance.
On balance, the Monetary Board is of the view that prevailing monetary policy settings remain appropriate. The manageable inflation outlook and strong domestic growth support keeping policy settings steady given renewed market volatility. Going forward, the BSP will continue to monitor evolving price and output developments to ensure that the monetary policy stance remains consistent with ensuring price and financial stability while supporting sustainable economic growth.