BSP maintains key policy rates anew

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Moderate inflation pressures, firm domestic activity, and positive growth dynamics are keeping current policy settings ‘appropriate,’ the Monetary Board says

MANILA, Philippines – The Monetary Board has decided to maintain the Bangko Sentral ng Pilipinas’ (BSP) key policy rates anew, citing that prevailing monetary policy settings remain applicable.

During its meeting Thursday, February 12, the Monetary Board decided to maintain BSP’s key policy rates at 4% for the overnight borrowing or reverse repurchase (RRP) facility, and 6% for the overnight lending or repurchase (RP) facility. 

The interest rates on term RRPs, RPs, and special deposit accounts (SDAs) were also kept steady.

RRP is the interest rate on the RP transaction, which is typically contracted between the BSP and banks. RRPs may also have overnight or term maturities.

SDAs, meanwhile, are fixed-term deposits by banks and trust entities of BSP-supervised financial institutions with the BSP. BSP expanded the access to the SDA facility to allow trust entities of financial institutions under BSP supervision to deposit in the facility.

In June last year, BSP raised the interest rate on the SDA facility by 25 basis points to 2.25% from 2% across all tenors effective immediately.

The reserve requirement ratios, or the central bank regulation that sets the minimum fraction of customer deposits and notes that each commercial bank must hold as reserves, were left unchanged as well.

BSP raised banks’ reserve requirement ratio by 1 percentage point, effective May 30, 2014, amid rising inflation during that period.

Broadly balanced

Latest baseline forecasts show a lower inflation path within the target range of 3% plus or minus 1 percentage point for both 2015 and 2016, while inflation expectations remain firmly anchored.

BSP also noted that inflation pressures have moderated further since the previous monetary policy meeting, reflecting mainly the significant decline in world oil prices.

Prospects for domestic activity continue to be firm, and positive growth dynamics are expected to be supported by buoyant private demand, sustained bank lending growth, and upbeat business sentiment, the Monetary Board also observed.

Potential price pressures due to pending petitions for adjustments in utility rates and possible power shortages remain as risks, the Monetary Board noted.

Downside risks could also arise from possible slower-than-expected global economic activity.

As such, the within-target inflation outlook and robust domestic growth support are keeping policy settings steady, the Monetary Board said.

As BSP always assured, it will continue to monitor developments affecting the inflation outlook to ensure that the monetary policy stance remains consistent with its price and financial stability objectives.

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