At its meeting today, the Monetary Board decided to maintain the BSP’s key policy interest rates steady at 7.0 percent for the overnight borrowing or reverse repurchase (RRP) rate and 9.25 percent for the overnight lending or repurchase (RP) rate.
In its assessment of the outlook for inflation and macroeconomic conditions, the Monetary Board noted that inflation continues to be caused mainly by oil prices as well as the recent adjustments in transport fares and wages. Meanwhile, demand conditions are characterized by moderate economic growth due to a slowdown in consumer spending in the first quarter.
At the same time, the Monetary Board recognizes that the volatility in the foreign exchange market could affect the inflation outlook. Given indications of slower output performance, the monetary authorities stressed monetary policy shall be used only to address persistent volatility of the peso which will have an inflation impact.
With the earlier policy move to raise the reserve requirements to help keep liquidity in check, the BSP continues to monitor the level of money supply to ensure an appropriate level of liquidity. The Monetary Board also noted the narrowing differentials between the domestic and foreign interest rates that can potentially have an effect on foreign exchange flows, exchange rate and ultimately, inflation. Moreover, the monetary authorities underscored their readiness to act preemptively to curb any possible build-up in inflation expectations. The Monetary Board also reiterated that it will continue to support the use of direct non-monetary measures that would ensure greater availability and timely distribution of basic food products to cushion pressures on consumer prices.