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 of inflation dynamics and the risks to the inflation outlook over the policy horizon. Latest baseline forecasts continue to indicate that inflation could settle below the target range of 3.0 percent ± 1 percentage point for 2015. However, notwithstanding the recent low inflation readings, inflation is projected to return steadily to a path consistent with the inflation target for 2016-2017, given the foreseen adverse weather conditions and the pending petitions for utility rate increases. Meanwhile, inflation expectations remain anchored within the inflation target band. The Monetary Board also considered the risks to the inflation outlook to be broadly balanced. On the one hand, potential upside pressures could come from the impact of protracted El Niño dry weather conditions on food prices and utility rates. On the other hand, downside risks could arise from possible slower-than-expected global economic activity.
The Monetary Board also observed that domestic demand conditions have stayed firm, as business and consumer sentiment continue to be buoyant and domestic liquidity remains adequate. In addition, the Monetary Board noted that the challenging external environment and uneven growth prospects in advanced and key emerging economies supported a steady policy setting.
Given these considerations, the Monetary Board believes that the benign inflation environment and the economy’s underlying growth momentum provide adequate room to maintain monetary policy settings. The BSP will continue to monitor emerging price and output conditions to ensure price and financial stability conducive to sustainable economic growth.