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Monetary Board Holds Policy Settings Steady

02.07.2019

At its meeting on monetary policy today, the Monetary Board decided to keep the interest rate on the BSP’s overnight reverse repurchase (RRP) facility unchanged at 4.75 percent. The interest rates on the overnight lending and deposit facilities were likewise held steady.

The Monetary Board’s decision is based on its assessment of a more manageable inflation environment. Latest baseline inflation forecasts show inflation settling within the target band of  3.0 percent ± 1.0 percentage point for 2019-2020, as price pressures continue to recede due to the decline in international crude oil prices and the normalization of supply conditions for key food items. Inflation expectations have also declined further and are now aligned to the inflation target for 2019-2020. At the same time, domestic demand conditions have remained firm, supported by a projected recovery in household spending and the sustained implementation of the government’s infrastructure program.

Meanwhile, the risks to the inflation outlook are seen to remain evenly balanced for 2019 while leaning toward the downside for 2020 given a more uncertain global economic environment, which in turn could temper potential upward pressures from commodity prices in the coming months.

Given these considerations, the Monetary Board deems the prevailing monetary policy settings to be appropriate, as previous monetary responses continue to work their way through the economy. The Monetary Board also emphasized that the BSP remains vigilant against developments that could affect the outlook for inflation and is prepared to take appropriate policy action as necessary to safeguard its price and financial stability objectives.

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