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Monetary Board Keeps Policy Rates Steady, Adjusts Reserve Requirement

03.27.2014

Statement by BSP Governor Amando M. Tetangco

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 and RPs as well as SDAs were also kept steady. Meanwhile, the Monetary Board decided to increase the reserve requirement by one percentage point effective on 4 April 2014.

In deciding to maintain policy rates, the Monetary Board noted 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. Inflation expectations also remain broadly aligned with the target over the policy horizon. At the same time, the Monetary Board noted that the balance of risks to the inflation outlook continues to be skewed to the upside, with potential price pressures emanating from pending petitions for adjustments in utility rates and from the possible increases in food and oil prices.

The Monetary Board’s decision to raise the reserve requirement is intended to guard against potential risks to financial stability that could arise from continued strong liquidity growth and rapid credit expansion.

The Monetary Board concluded that buoyant domestic growth prospects allow some scope for a measured adjustment in the BSP’s policy instruments amid the ongoing normalization of monetary policy overseas. Going forward, the BSP will continue to monitor emerging price and output conditions and will consider further adjustments in its monetary policy tools as necessary to safeguard price and financial stability. 

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