At its meeting today, the Monetary Board decided to maintain the BSP's key policy rates at 4.00 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6.00 percent for the overnight lending or repurchase (RP) facility. The interest rates on term RRPs, RPs and special deposit accounts (SDA) 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 continues to be more manageable, with the risks to the inflation outlook remaining broadly balanced over the policy horizon. Latest baseline forecasts show a lower inflation path for 2014-2016 relative to the previous policy meeting, reflecting in large part the subdued outlook for global commodity prices. Inflation expectations are also generally lower and remain aligned to the inflation target. Meanwhile, output growth moderated in Q3 2014 as agricultural production contracted amid unfavorable weather conditions and as public spending slowed down. The Monetary Board also noted that while global economic conditions remain challenging, prospects for domestic activity continue to be firm, supported by strong domestic demand, robust bank lending growth, and buoyant business sentiment.
On balance, the Monetary Board is of the view that prevailing monetary policy settings remain appropriate given the manageable inflation outlook and favorable domestic growth prospects. Going forward, the BSP will continue to monitor evolving price and output developments and remains prepared to take appropriate measures as necessary to ensure that the monetary policy stance continues to support an environment characterized by price and financial stability.