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 prevailing price and output conditions support maintaining current monetary policy settings. Latest baseline forecasts show that inflation could settle slightly below the target range for 2015 but is likely to remain within the target range of 3.0 percent ± 1 percentage point over the rest of the policy horizon. Inflation expectations also continue to be anchored within the inflation target band. Meanwhile, the Monetary Board noted the 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, modest rise in food and commodity prices, and slower global economic activity could pose downside risks to inflation.
In deciding to keep the BSP’s monetary policy settings unchanged, the Monetary Board observed that the recent benign inflation outturns have been the result of favorable supply-side conditions, which are seen as largely transitory. Over the policy horizon, inflation is projected to rise gradually and stabilize within the lower half of the inflation target range. At the same time, the Monetary Board noted that recent developments on the global front require careful monitoring, as they could pose threats to financial stability.
Given these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriately calibrated at this time. The BSP will continue to keep a watchful eye on domestic and external conditions to ensure that the monetary policy stance stays in line with maintaining price and financial stability.