At its meeting on monetary policy today, the Monetary Board decided to reduce the interest rate on the BSP’s overnight reverse repurchase (RRP) facility by 25 basis points to 4.5 percent, effective on Friday, 10 May 2019. The interest rates on the overnight lending and deposit facilities were reduced accordingly.
The Monetary Board’s decision is based on its assessment that the inflation outlook continues to be manageable, with easing price pressures owing to the decline in food prices amid improved supply conditions. Latest baseline forecasts indicate that inflation remains likely to settle within the target range of 3.0 percent ± 1.0 percentage point for both 2019 and 2020, while inflation expectations have moderated further.
In deciding on the stance of monetary policy, the Monetary Board noted the impact of the budget delays on near-term economic activity, but took the view that the prospects for domestic demand remain firm, to be supported by a projected recovery in household spending and the continued implementation of the government’s infrastructure program. In addition, the Monetary Board observed that the global economic growth momentum has slowed down in 2019. Meanwhile, indications of slower growth in domestic liquidity and credit require careful monitoring.
At the same time, the Monetary Board also noted that the risks to the inflation outlook remain broadly balanced for 2019 amid risks of a prolonged El Niño episode and higher-than-expected increases in global oil prices. For 2020, the risks continue to lean toward the downside as weaker global economic activity could temper commodity price pressures.
Looking ahead, the BSP will continue to monitor developments affecting the inflation outlook to ensure that the monetary policy stance remains consistent with its price stability objective.