At its last meeting on monetary policy for 2017, the Monetary Board decided today to maintain the interest rate on the BSP's overnight reverse repurchase (RRP) facility at 3.0 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 Monetary Board's decision is based on its assessment that the outlook for the inflation environment has been broadly unchanged. This is indicated by the latest baseline forecasts remaining within the target range of 3.0 percent 1 percentage point for 2018-2019. Inflation expectations also continue to be firmly anchored to the target over the policy horizon.

At the same time, the overall balance of risks to the inflation outlook remains tilted toward the upside due in part to possible higher crude oil prices. While there may be potential transitory effects on consumer prices from the proposed tax reform program, various mitigation measures and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term. Meanwhile, the proposed reforms in the rice industry involving the replacement of quantitative restrictions with tariffs and the deregulation of rice imports could serve to reduce inflation.

The Monetary Board also observed that geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continue to pose downside risks to the near-term prospects for global economic growth. Nonetheless, the Monetary Board emphasized that prospects for domestic economic activity are likely to remain firm owing to buoyant consumer and business sentiment and ample liquidity. Moreover, as credit continues to expand in line with output growth, the Monetary Board remains watchful over evolving liquidity and credit conditions and their implications for price and financial stability.

Based on these considerations, the Monetary Board believes that prevailing monetary policy settings should be kept. Nevertheless, 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 remains consistent with the medium-term target while being supportive of sustainable economic growth.

Source: Bangko Sentral ng Pilipinas (BSP)