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 continues to be manageable. Latest baseline forecasts indicate a lower path of future inflation, with average inflation remaining within the target range of 3.0 percent ± 1 percentage point for 2017-2019. Inflation expectations also continue to be firmly anchored to the target over the policy horizon.
At the same time, the assessment of risks to the inflation outlook remains tilted toward the upside. While there may be potential transitory impact of the proposed tax reform program, the social safety nets are expected to mitigate the resulting inflationary pressures. The long-run effects on productivity will improve overall supply and further dampen inflation. Meanwhile, prospects for the global economy have improved, but risks to external demand remain tilted to the downside. Nonetheless, the Monetary Board emphasized that while global economic conditions remain challenging, prospects for domestic economic activity continue to be firm owing to buoyant consumer and business sentiment, ample liquidity, and sustained credit growth. In addition, the Monetary Board has considered the potential impact on global financial market conditions of the ongoing monetary policy adjustment in the US, noting that maintaining monetary policy settings at this time would allow the BSP to continue to assess evolving economic developments and calibrate its policy tools as appropriate.
With these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate. Going forward, the BSP will remain vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure that future inflation remains consistent with the medium-term target while being supportive of sustainable economic growth.