Philippines Monetary Policy

Philippines

Philippines: Central Bank keeps rate unchanged at 4.00% again

June 25, 2015

At its 25 June monetary policy meeting, the Central Bank decided to leave its Reverse Repurchase Rate at 4.00%. This is the sixth consecutive meeting in which the Bank has maintained the rate unchanged. The Central Bank also decided to keep the reserve requirement ratio steady and to leave the interest rates on its Special Deposit Accounts (SDA) unchanged at 2.50%. SDA facilities are fixed-term deposit accounts with maturities of between one week and one month that the Central Bank offers to credit institutions and bank trust entities.

The Central Bank explained its decision to keep rates on hold in stating that, “current monetary policy settings remain appropriate given the within-target inflation forecasts and the underlying strength of domestic demand conditions.” The Bank noted that inflation expectations were well-anchored and it sees inflation remaining in the lower half of its 2.0% to 4.0% target range in 2015 and 2016. In addition, in the Bank’s view, the risks to its inflation forecast are broadly balanced. Pending increases to the electricity tariff and the fact that the weather might be drier than expected due to the El Niño phenomenon constitute the major upside risks, while weak global economic growth is the main downside risk.

In the Central Bank’s view, domestic demand remains solid, sustained by private consumption and strong business confidence, even though GDP growth came in below expectations in the first quarter of this year. The Central Bank added that going forward it sees, “ample domestic liquidity and planned higher public spending,” to support the economy. The next monetary policy meeting is scheduled for 13 August.

FocusEconomics Consensus Forecast panelists see the Reverse Repurchase rate at 4.03% in 2015. For 2016, panelists expect the Reverse Repurchase rate to rise to 4.50%.


Author: Teresa Kersting, Economist

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Philippines Monetary Policy Chart


Philippines Monetary Policy June 2015

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


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