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Monetary Board Keeps Policy Rates Unchanged


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 likewise left unchanged.

The Monetary Board’s decision is based on its assessment that, on balance, current monetary policy settings remain appropriate given the within-target inflation forecasts and the underlying strength of domestic demand conditions. Latest baseline forecasts continue to indicate that inflation is likely to settle within the lower half of the target range of 3.0 percent ± 1 percentage point for 2015-2016, while inflation expectations remain firmly anchored following recent inflation outturns. The Monetary Board likewise observed that the risks to the inflation outlook continue to be broadly balanced, with upside risks coming from pending petitions for power rate adjustments and the impact of stronger-than-expected El Niño dry weather conditions on food prices and utility rates. On the other hand, slower global economic activity could pose downside risks to inflation.

The Monetary Board noted that domestic demand conditions remain firm despite the lower-than-expected first-quarter output growth, supported by solid private household and capital spending as well as buoyant business confidence. At the same time, ample domestic liquidity and planned higher public spending are expected to further support domestic economic activity and sustain the economy’s momentum in the months ahead.

Given these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriately calibrated to the outlook for inflation and domestic economic activity. Going forward, the BSP will continue to monitor domestic and external developments to ensure that the monetary policy stance remains in line with maintaining price and financial stability.

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