Philippines Monetary Policy September 2016


Central Bank keeps rates unchanged at its September meeting

At its meeting on 22 September, the Central Bank decided to leave the Overnight Reverse Repurchase facility (RRP) unchanged at 3.00% as the markets had expected. In September, the Central Bank also kept the Overnight Lending Facility (OLF) and the Overnight Deposit Facility (ODF) unchanged at 3.50% and 2.50%, respectively. The ODF establishes the floor and the OLF the ceiling of the interest rate corridor system. Moreover, the Bank kept the reserve requirement ratio unchanged.

The Central Bank explained that it held rates, “based on its assessment that the inflation environment remains manageable.” On the whole, the Bank expects inflation to stay slightly below its target range of 3.0% plus/minus 1.0 percentage points this year and to rise toward the mid-point of the range during next year and in 2018. Moreover, the Bank sees inflation expectations broadly in line with the inflation target. As for the Philippine economy, the monetary authorities expect that economic growth will remain solid, supported by strong private consumption and investment, adequate liquidity, buoyant business and consumer sentiment, and larger public spending. Lastly, the Bank assessed that the risks to the inflation outlook are tilted to the upside, because of potential upward adjustments in electricity rates and in excise tax rates on petroleum products. The next monetary policy meeting is scheduled for 10 November.

FocusEconomics Consensus Forecast panelists see the Overnight Reverse Repurchase facility at 3.02% at the end of 2016. For 2017, panelists expect the Reverse Repurchase rate to rise to 3.27%.

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Philippines Monetary Policy Chart

Philippines Monetary Policy September 2016

Note: Reverse Repurchase Rate in %.
Source: Central Bank of the Philippines (BSP).

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