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 4.50 percent. The interest rates on the overnight lending and deposit facilities were likewise held steady.
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. The Monetary Board also noted that while real sector activity moderated in the first quarter of the year, overall domestic economic activity is likely to remain firm, supported by a projected recovery in household spending and the continued implementation of the government’s infrastructure spending program.
At the same time, the Monetary Board observed that the risks to the inflation outlook are broadly balanced for 2019 and 2020. Weaker global economic prospects amid a possible easing in global demand and increased trade tensions continue to temper the inflation outlook. The potential adverse effects of a prolonged El Niño episode remain a key upside risk to inflation.
On balance, therefore, the Monetary Board believes that the manageable inflation outlook and firm domestic growth prospects support keeping monetary policy settings steady for the time being. A prudent pause allows the BSP to observe and assess the impact of prior monetary adjustments including the phased reduction in the reserve requirements to be completed by the end of July. Going forward, the BSP will continue to monitor emerging price and output conditions to ensure that monetary policy remains in line with the BSP’s price stability objective while being supportive of economic growth.