At its meeting today, the Monetary Board decided to maintain the BSP's key policy rates at 4.0 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6.0 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 indicate that average inflation would likely settle below the target range of 3.0 percent ± 1 percentage point for 2015. However, inflation is seen to return gradually to a path consistent with the inflation target for 2016-2017, as the effects of recent weather disturbances continue to be felt. Meanwhile, inflation expectations remain firmly anchored within the inflation target band for 2016 and 2017. Potential upside pressures could come from the impact of prolonged El Niño dry weather conditions on food prices and utility rates as well as pending petitions for power rate adjustments, while downside risks could arise from possible slower-than-expected global economic activity.
The Monetary Board also observed that domestic demand conditions are likely to stay firm, supported by solid private household and capital spending, buoyant market sentiment, and adequate domestic liquidity. In addition, the Monetary Board has considered the potential impact of the recent monetary policy adjustment in the US on global financial conditions, noting that keeping monetary policy settings steady at this juncture would allow the BSP some room to continue to assess evolving global economic conditions and calibrate its policy tools as appropriate.
With these considerations, the Monetary Board believes that prevailing monetary policy settings are appropriate given 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 price and financial stability.