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 of inflation dynamics and the risks to the inflation outlook over the policy horizon. While inflation has risen due to the recent increases in food and oil prices, latest baseline forecasts continue to indicate that the future inflation path will remain within the target range of 3.0 percent ± 1 percentage point for 2017-2018. Inflation expectations are also aligned with the inflation target over the policy horizon.
The Monetary Board further noted that the balance of risks surrounding the inflation outlook continues to be weighted toward the upside, given possible adjustments in electricity rates as well as the initial impact of the government’s broad fiscal reform program. Meanwhile, uncertainty over global growth prospects continues to pose a key downside risk to the inflation outlook. The Monetary Board stressed that while the global economic environment has become more challenging due to expected shifts in macroeconomic policies in advanced economies, including the ongoing normalization of monetary policy in the US, domestic economic activity is expected to stay firm, supported by buoyant household consumption and private investment, increased fiscal spending, and ample credit and liquidity.
With these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate. Going forward, the BSP will continue to monitor and assess evolving economic developments and will calibrate its policy tools as appropriate to ensure sustained price and financial stability.