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Monetary Board Holds Monetary Policy Settings Steady

11.14.2019

At its meeting on monetary policy today, the Monetary Board decided to maintain the interest rate on the BSP’s overnight reverse repurchase (RRP) facility at 4.0 percent. Accordingly, the interest rates on the overnight deposit and lending facilities were held unchanged at 3.5 percent and 4.5 percent, respectively.

Latest baseline forecasts of the BSP continue to indicate that inflation is likely to settle within the lower half of the target band of 3.0 percent ± 1 percentage point for 2019 up to 2021, with the balance of risks to the inflation outlook leaning toward the upside for 2020 and toward the downside for 2021. Upside risks to inflation over the near term emanate mainly from the potential impact of the African Swine Fever outbreak on food prices and from potential volatility in oil prices amid geopolitical tensions in the Middle East. At the same time, weak global economic prospects continue to temper the inflation outlook, as uncertainty over trade policies weigh down on global economic activity and demand. Meanwhile, inflation expectations based on the BSP’s survey of private sector economists also remain well-anchored within the inflation target range.

Notwithstanding prospects in the global front, firm private domestic spending and sustained progress in policy reforms will serve as a buffer against external headwinds.

Given these considerations, the Monetary Board believes that prevailing monetary policy settings remain appropriate. This is supported by the benign inflation outlook and a firm outlook for domestic economic growth. At the same time, a prudent pause in monetary adjustments will enable the cumulative 75-basis-point reduction in policy rates as well as the cut in reserve requirement ratios to continue working their way through the economy. The Monetary Board also trusts that the fiscal budget for 2020 will be passed within this year.

Going forward, the BSP will continue to monitor emerging price and output conditions to ensure that the monetary policy stance remains consistent with ensuring stable prices while supporting economic growth over the medium term.

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