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BSP Maintains Key Interest Rates

03.11.2004

At today’s meeting, the Monetary Board decided to keep the BSP’s key policy interest rates unchanged at 6.75 percent for the overnight borrowing or reverse repurchase (RRP) rate and 9.0 percent for the overnight lending or repurchase (RP) rate. The BSP’s policy rates were last adjusted on 2 July 2003 when the rates were cut by 25 basis points.

Based on its overall assessment of economic and financial indicators, the Monetary Board concluded that the current monetary policy stance remains appropriately supportive of the economy’s low inflation growth path.

The outlook for inflation over the policy horizon continued to be manageable with some downside risks such as the impact of volatile movements in international oil prices, transport fare adjustments and continuing pressures on the foreign exchange markets driven in part by political developments. The Board also noted the relative stability in the foreign exchange market. The decision to maintain the current monetary policy settings also reflects the Monetary Board’s view that the present stance of monetary policy is appropriately supportive of the price stability and growth objectives of the economy. Furthermore, the Monetary Board believes that the current monetary policy is consistent with the need to ensure sufficient liquidity to sustain domestic demand. This requires that the general macroeconomic environment remains conducive to credit demand and investment activity and that financing conditions do not become unduly restrictive to loan activity.

Going forward, the BSP will continue to monitor carefully all developments that could affect the monetary authorities’ assessment of risks to inflation and inflation expectations over the policy horizon.

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