Monetary Board Maintains Monetary Policy Settings

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 kept unchanged at 3.5 percent and 4.5 percent, respectively.

The Monetary Board's decision is based on its assessment of a benign inflation environment. Latest baseline forecasts indicate that the future inflation path remains within the target range of 3.0 1.0 percentage point in 2020-2021, with well-anchored inflation expectations. Meanwhile, the balance of risks to the inflation outlook continue to lean slightly toward the upside in 2020 and toward the downside in 2021. Upside risks to inflation over the near term emanate mainly from potential volatility in international oil prices amid geopolitical tensions in the Middle East as well as from the potential impact of the African Swine Fever outbreak and recent weather disturbances on domestic food prices. However, uncertainty over trade policies in major economies continue to weigh down on global economic activity and demand and could thus mitigate upward pressures on commodity prices.

Notwithstanding the weak global growth outlook, prospects for the Philippine economy continue to be robust on the back of firm domestic demand. Sustained policy support from increased fiscal spending, as well as improved domestic liquidity conditions owing to recent monetary adjustments, is also expected to support growth in the coming months.

Given these considerations, the Monetary Board is of the view that the within-target inflation outlook and solid prospects for domestic growth support keeping monetary policy settings steady. Going forward, the BSP will continue to monitor developments affecting the inflation outlook and demand conditions to ensure that the monetary policy stance remains consistent with its price and financial stability objectives.

Source: Bangko Sentral ng Pilipinas (BSP)