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 kept steady. The reserve requirement ratios were left unchanged as well.
The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable. While inflation forecasts have slightly risen due to the recent increase in global oil prices, utility rate adjustments, and the impact of the recent typhoons, the future inflation path continues to be within the target over the policy horizon since the uptick is expected to be largely transitory. Meanwhile, market expectations of inflation remain consistent with the target range.
Nonetheless, the Monetary Board is mindful that the balance of risks to the inflation outlook is still weighted toward the upside given the potential increases in food prices as well as the pending petitions for further adjustments in utility rates.
At the same time, the Monetary Board pays close attention to the evolving economic growth and liquidity dynamics and their implications for price and financial stability. While global economic conditions could be challenging, prospects for domestic activity are expected to stay firm, supported by buoyant domestic demand as well as favorable consumer and business sentiment. Moreover, as credit expands in lock-step with output growth, the economy’s improved absorptive capacity will likewise be sustained, thus mitigating inflation pressures.
Going forward, the BSP will continue to monitor emerging price and output conditions to ensure the consistency of the monetary policy stance with stable prices and sustainable economic growth.