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Monetary Board Maintains Monetary Policy Settings


At its meeting today, the Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase (RRP) facility at 3.0 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The reserve requirement ratios were likewise left unchanged.

The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable. Latest forecasts continue to indicate that average inflation is likely to settle slightly below the 3.0 percent ± 1.0 percentage point target range in 2016 and rise toward the mid-point of the target range in 2017 and 2018. The overall balance of risks surrounding the inflation outlook is also seen to be broadly balanced, with upside risks emanating from pending petitions for adjustments in electricity rates. Slower global economic activity also remains the key downside risk to the inflation outlook. Meanwhile, inflation expectations continue to be broadly in line with the inflation target over the policy horizon.

At the same time, the Monetary Board noted that prospects for global economic growth have remained subdued since the previous meeting. By contrast, domestic economic conditions continue to be firm, supported by solid private household consumption and investment, buoyant business and consumer sentiment, and adequate credit and domestic liquidity. Higher fiscal spending is also expected to further boost domestic demand.

Given these considerations, the Monetary Board believes that current monetary policy settings remain appropriate. At the same time, increased uncertainty over prospects for growth and monetary policy action in major advanced economies requires prudence in policy settings. Going forward, the BSP will continue to monitor emerging price and output conditions to ensure price and financial stability conducive to sustained economic growth.

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