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Monetary Board Keeps Policy Settings Unchanged

09.21.2017

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 show the future inflation path will continue to be within the target range for 2017-2019. Meanwhile, inflation expectations remain firmly anchored close to the midpoint of the Government’s 3 percent ± 1 percentage point target over the policy horizon.

The balance of risks to the inflation outlook also continues to be on the upside. While the proposed tax reform program may exert potential transitory pressures on prices, various social safety nets and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term.

At the same time, while prospects for global economic growth have stayed broadly upbeat, geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continue to pose downside risks to external demand. The outlook for domestic economic activity remains firm, supported by positive consumer and business sentiment and ample liquidity. Moreover, as credit for production activities continues to expand in line with output growth, the economy’s absorptive capacity is likewise seen to improve, thus mitigating inflation pressures over the long run. Nonetheless, the Monetary Board remains watchful over evolving economic growth and liquidity conditions and their implications for price and financial stability.

Based on these considerations, the Monetary Board believes that prevailing monetary policy settings continue to be appropriate. Looking ahead, the BSP will continue to be vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure stable prices while supporting sustainable economic growth.

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