At its meeting on monetary policy today, the Monetary Board decided to maintain its policy rate, the interest rate on the BSP’s overnight reverse repurchase (RRP) facility, steady at 3.0 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept unchanged.
The Monetary Board’s decision is based on its assessment that while latest baseline forecasts show higher inflation outturns for 2018, the inflation path is expected to moderate and settle within the inflation target range of 3.0 percent ± 1.0 percentage point in 2019. The Monetary Board also noted that prospects for domestic activity continue to be firm on the back of robust domestic demand, manageable growth in credit and liquidity, and a sustained recovery in global economic growth. The higher inflation in January is also due to better enforcement of tax laws on tobacco as well as temporary increases in prices of selected food items, such as fish and vegetables.
Nevertheless, the Monetary Board observed that the risks to the inflation outlook remain weighted toward the upside owing mainly to price pressures emanating from possible further increases in global oil prices. At the same time, the Monetary Board saw that inflation expectations continue to be anchored within the inflation target band over the policy horizon. The BSP is watchful against any signs of second-round effects and inflation becoming broader based.
Given these considerations, the Monetary Board reiterates that it remains committed to the BSP’s price stability objective and will continue to closely monitor the evolving conditions for prices and output for any threats to the inflation target. The Monetary Board stands ready to take appropriate measures as necessary to ensure that the monetary policy stance continues to support price and financial stability.