Statement by the Bankgo Sentral NG Pilipinas:
The Monetary Board decided to maintain the BSP's key policy interest rates at 3.50 percent for the overnight borrowing or reverse repurchase (RRP) facility and 5.50 percent for the overnight lending or repurchase (RP) facility. The reserve requirement ratios were kept steady as well. Meanwhile, the Monetary Board further reduced the interest rates on the Special Deposit Account (SDA) facility by 50 basis points to 2.0 percent across all tenors, effective immediately.
The Monetary Board’s decision to maintain the policy interest rates at their current levels is based on its assessment that the inflation environment is likely to remain manageable over the policy horizon, with expectations firmly anchored within the inflation target band. The projected inflation path continues to track the lower half of the 4 ± 1 percent target range for 2013 and 2014. Moreover, the risks to the inflation outlook remain evenly balanced. Uncertainty over the strength of the global economy and the relative firmness of the peso are the key downside risks to the broad outlook for prices. However, power rate adjustments and the possibility of a sustained surge in liquidity owing to strong capital inflows could push inflation higher as well.
At the same time, the Monetary Board noted that the benign inflation environment and robust domestic growth prospects provided scope for further enhancing the efficiency of the operations for absorbing liquidity through the SDA facility. The adjustment is in line with the BSP’s continuing efforts to fine-tune its monetary policy instruments and thereby gain greater flexibility in conducting monetary operations, and also to ensure adequate liquidity for economic activity.
Going forward, the BSP will continue to monitor emerging price and output conditions to ensure that the monetary policy stance remains consistent with maintaining stable prices while supporting economic growth. The BSP also aims to deploy macroprudential measures as needed to pre-emptively address any potential misalignment in asset prices.