Philippines Monetary Policy February 2017


Philippines: Central Bank keeps rates unchanged at its February meeting

February 13, 2017

At its meeting on 9 February, the Central Bank decided to leave the Overnight Reverse Repurchase facility (RRP) unchanged at 3.00%, as the markets had expected. In February, 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. Likewise, the Bank kept the reserve requirement ratios untouched.

The Central Bank attributed its decision to hold rates to its assessment of inflation dynamics and the risks to the inflation outlook over the policy horizon. On the whole, the Bank expects inflation to remain within its target range of 3.0% plus/minus 1.0 percentage points in both 2017 and 2018, while inflation expectations should also stay aligned with the inflation target.

The monetary authorities noted that inflation risks are tilted to the upside, due to possible hikes in electricity tariffs and the impact of the government’s fiscal reform program. On the other hand, the Bank assessed that the main downside risks to the inflation outlook are represented by the uncertainties surrounding global growth prospects due to expected shifts in macroeconomic policies in advanced economies, including monetary policy normalization in the U.S. As for the Philippines’ economy, the Bank expects it to remain robust thanks to strong private consumption and investment, higher government spending and credit expansion. All in all, the Bank considered that maintaining the current monetary policy setting unchanged will give it sufficient room to assess upcoming economic developments and react accordingly.

The next monetary policy meeting is scheduled for 23 March.

FocusEconomics Consensus Forecast panelists see the Overnight Reverse Repurchase facility at 3.33% at the end of 2017. For 2018, panelists expect the Reverse Repurchase rate to rise to 3.55%.

Author: Massimo Bassetti, Economist

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Philippines Monetary Policy Chart

Philippines Monetary Policy February 2017

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

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