Monetary Board maintains policy settings

October 1, 2020

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 2.25 percent. The interest rates on the overnight deposit and lending facilities were likewise kept at 1.75 percent and 2.75 percent, respectively.

The Monetary Board’s decision is based on the assessment that prevailing monetary policy settings remain appropriate. Latest baseline inflation forecasts show a slightly lower path within the Government’s 2-4 percent target range. This reflects the lower-than-expected inflation in August, the moderation in global crude oil prices, and the appreciation of the peso. The balance of risks to the inflation outlook also continues to lean toward the downside from 2020 until 2022 owing largely to the risk of potential disruptions to domestic and global economic activity amid the ongoing pandemic. Meanwhile, inflation expectations remain firmly anchored within the inflation target band.

The Monetary Board also noted that global economic activity has stabilized in recent weeks. However, uncertainty remains elevated with the resurgence of COVID-19 cases in some jurisdictions. At the same time, the Monetary Board observed encouraging signs of recovery in domestic economic activity, supported by ample liquidity in the financial system.

Given these considerations, the Monetary Board is of the view that a continued pause will allow prior measures by the BSP to further work their way through the economy. The gradual easing of restrictions, along with sustained efforts by the Government to protect human health and livelihood, should also help lift market sentiment and aid the recovery of the economy in succeeding months.

Looking ahead, the BSP stands ready to deploy its full arsenal of instruments as needed in fulfillment of its mandate to maintain price and financial stability conducive to sustainable economic growth.