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Monetary Board Holds Policy Settings Steady

11.09.2017

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 outlook for the inflation environment remains manageable. While inflation has trended higher due mainly to higher utility rates and fuel prices, latest forecasts continue to show the future inflation path staying within the Government’s  3 percent ± 1 percentage point target range for 2018-2019. Inflation expectations also remain anchored close to the midpoint of the inflation target range over the policy horizon.

The balance of risks to the inflation outlook continues to lean toward the upside due to possible higher crude oil prices. The proposed tax reform program of the National Government may exert potential transitory pressures on prices, although 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. On the other hand, the proposed reform in the rice industry involving the replacement of quantitative restrictions with tariffs and the deregulation of rice imports could temper inflation.

At the same time, geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies pose downside risks to near-term prospects for global economic growth.  Nonetheless, the outlook for domestic economic activity remains firm, supported by positive consumer and business sentiment and ample liquidity. Moreover, while credit continues to expand in line with output growth, the Monetary Board remains watchful over evolving liquidity and credit 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. The BSP will continue to monitor price and output developments for any risks to the inflation outlook and will adjust its policy settings as necessary to ensure stable prices and sustainable economic growth.

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