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 of manageable inflation. While inflation has risen slightly due mainly to the recent increase in food prices on account of adverse weather conditions, latest baseline forecasts continue to indicate that the future inflation path is likely to stay within the target ranges of 4±1 percent for 2014 and 3±1 percent for 2015. Meanwhile, market expectations remain anchored to the inflation target over the policy horizon.
The Monetary Board noted that the balance of risks to the inflation outlook remains slightly weighted toward the upside given the pending petitions for adjustments in utility rates and the possible uptick in food prices. The Board also noted that while the global economy has become more challenging because of heightened financial market uncertainty following monetary policy adjustments in the US and generalized concerns about the sustainability of growth in emerging economies, domestic economic activity is likely to stay firm. Sound fundamentals such as buoyant demand, strong fiscal and external positions as well as favorable consumer and business sentiment would support the economy.
The Monetary Board will continue to closely monitor and assess evolving growth and liquidity conditions and will consider policy adjustments, when needed, to ensure continued price and financial stability.