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 outlook for inflation remains manageable, consistent with favorable growth prospects. While the average headline inflation for the first two months of 2017 has risen due to the recent increases in food and oil prices as well as base effects, latest baseline forecasts are slightly lower than previous forecasts and within the target range of 3.0 percent ± 1 percentage point for 2017-2018. Inflation expectations also remain anchored to the inflation target over the policy horizon.
The Monetary Board also observed that the balance of risks surrounding the inflation outlook remains tilted toward the upside, given the transitory impact of the proposed tax reform program as well as possible adjustments in transportation fares and electricity rates. Meanwhile, lingering uncertainty over the prospects of the global economy, due in part to possible shifts in macroeconomic policies in advanced economies, continues to pose a key downside risk to the inflation outlook. The Monetary Board also noted the beneficial effects on inflation of the removal of quantitative restrictions on rice importation. The Board emphasized that domestic economic activity is projected to stay firm, supported by buoyant household consumption and private investment, increased government spending, and ample credit and liquidity.
With these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate. Looking ahead, the BSP will continue to monitor evolving economic conditions to ensure price and financial stability conducive to sustainable economic growth.