At its meeting today, the Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), voted unanimously to maintain the BSP’s key policy rates at 6.75 percent for the overnight borrowing or reverse repurchase (RRP) rate and 9.0 percent for the overnight lending or repurchase (RP) rate.
In its assessment of the prevailing inflation environment and overall macroeconomic conditions, the Monetary Board was of the view that the current monetary policy stance remains supportive of the economy’s growth path. The near-term outlook for inflation remains essentially unchanged since the last monetary policy meeting on 28 August 2003. Over the policy horizon, price dynamics should remain benign with the average inflation for 2004 expected to track broadly the Government’s announced target of 4.0-5.0 percent. The Monetary Board’s expectations of benign inflation are based on subdued improvements in aggregate demand, particularly credit demand, soft labor market conditions, along with the moderate influence of cost-push factors such as energy prices. Nevertheless, the Monetary Board recognized that the outlook for inflation still contains an undercurrent of risk in the form of possible adverse cost-side developments and adjustments in the foreign exchange market, which have a bearing on public expectations about future prices.
Given these considerations, the Monetary Board believes that the BSP’s monetary policy stance should continue to ensure the presence of adequate liquidity to support the growth in domestic demand. At the same time, it should remain sufficiently cautious to guard against any possible renewed price pressures that may emerge over the near term.
The Monetary Board is scheduled to meet again to review the BSP’s monetary policy stance on 23 October 2003.