Monetary Board keeps rates steady

August 10, 2017

The Monetary Board, policy- making body of the central bank, on Thursday maintained interest rate on the BSP’s overnight reverse repurchase (RRP) facility at 3 percent. The corresponding interest rates on the overnight lending and deposit facilities were also kept steady. The reserve requirement ratios were likewise left unchanged.

The decision, first under new Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr, was widely expected. Rates have remained since June 2016.

“The Monetary Board believes that prevailing monetary policy settings continue to be appropriate,” it said in a statement.

“The BSP will remain vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure that future inflation stays aligned with the medium-term target while being supportive of sustainable economic growth,”the Monetary Board added.

The Monetary Board’s decision is based on its assessment that the inflation environment remains manageable.

“While inflation forecasts have risen slightly due to the recent increase in global oil prices, the future inflation path continues to be within the target for 2017-2019.”, a central bank statement said.

Inflation expectations also remain firmly anchored close to the midpoint of the Government’s 3 percent ± 1 percentage point target over the policy horizon.

The balance of risks to the inflation outlook continues to be on the upside, the Monetary Board said.

While the proposed tax reform program may exert potential transitory pressures on prices, various social safety nets and the resulting improvement in productivity will likely temper the impact on inflation over the medium term, the Monetary Board said.

While output prospects for the global economy have improved, downside risks to external demand remain, due in part to geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies, it said.

Outlook for domestic economic activity continues to be firm, supported by buoyant consumer and business sentiment and ample liquidity, the Monetary Board said. DMS