Monetary Board Holds Policy Settings Steady

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 was based on its assessment that the inflation environment remains benign. While latest baseline forecasts have risen slightly due to the higher-than-expected inflation in July and recent increases in global crude oil prices, the future inflation path remains firmly within the Government’s 2-4 percent target. The balance of risks to the inflation outlook also leans toward the downside from 2020 until 2022 owing largely to potential disruptions to domestic and global economic activity amid the ongoing pandemic. Meanwhile, inflation expectations remain broadly consistent with the inflation target.

The Monetary Board noted that the outlook for global economic growth remained subdued and uncertain amid a resurgence in COVID-19 cases in many jurisdictions. The MB also noted the sharp contraction in domestic output in the first half of 2020, reflecting the impact of the enforcement of necessary measures to contain the spread of the virus in the country. At the same time, the Monetary Board observed early signs of recovery in domestic economic activity with the gradual easing of lockdown restrictions, supported by ample liquidity in the financial system.

Given these considerations, the Monetary Board is of the view that monetary policy settings remain appropriate for the time being. A prudent pause will enable the cumulative 175-basis-point reduction in the policy rate as well as other monetary and regulatory relief measures by the BSP to fully work their way through the economy, even as the National Government continues to implement interventions to bolster economic activity and protect human lives and livelihoods.

Going forward, the BSP remains committed to deploying its full range of instruments as needed in fulfillment of its mandate to promote non-inflationary and sustainable growth over the medium term.


Source: Bangko Sentral ng Pilipinas (BSP)