Philippines Monetary Policy December 2015


Philippines: Central Bank keeps rate unchanged in last meeting of 2015

December 17, 2015

In its last monetary policy meeting of 2015, on 17 December, the Central Bank decided to leave its Reverse Repurchase Rate at 4.00% as the markets had expected. The rate has been resting at this level since September 2014. 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 noted that annual average inflation—the Bank’s reference for monetary policy—will likely end 2015 below its target range of 3.0% plus/minus 1.0 percentage points. Nevertheless, the Bank sees inflation picking up and returning within its target range in 2016 and 2017, partly because food prices are expected to rise due to adverse weather conditions. The Bank added that inflation expectations were well-anchored. Similar to the previous meeting, the Monetary Board considers that upward risks to the inflation outlook could emerge from the effect of the El Niño weather phenomena on food prices and a hike in utility rates. Conversely, downward risks could emerge from slower-than-expected global economic growth. As for the domestic economy, the Central Bank sees domestic demand remaining solid, sustained by firm private spending, strong business sentiment and sufficient liquidity. The next monetary policy meeting is scheduled for 11 February.

FocusEconomics Consensus Forecast panelists see the Reverse Repurchase rate at 4.19% at the end of 2016. For 2017, panelists expect the Reverse Repurchase rate to rise to 4.38%.

Author: Teresa Kersting, Economist

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Philippines Monetary Policy Chart

Philippines Monetary Policy December 2015

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

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