Philippine central bank on Thursday decided to keep its key policy rates unchanged as expected, but lowered the interest rates on Special Deposit Account (SDA) facility by half-a-percentage point as part of its efforts to fine-tune the use of monetary policy tools.
Bangko Sentral Ng Pilipinas kept the interest rate on overnight borrowing or reverse repurchase (RRP) facility at 3.5 percent. The rate on overnight lending or repurchase (RP) facility stood at 5.5 percent.
At the same time, the Monetary Board reduced the interest rates on the SDA facility by 50 basis points to 2.5 percent across all tenors, with immediate effect.
The board also decided to set the interest rate on RRPs at 3.5 percent for all tenors. The reserve requirement ratios were kept steady.
The board said that its decision to maintain the policy interest rates at their current levels mainly reflected the assessment that inflation environment over the policy horizon is likely to remain manageable.
The central bank noted that lingering fiscal and financial market stresses in the advanced economies continue to dampen the broad outlook, thereby mitigating upward pressures on commodity prices. In addition, pending domestic power rate adjustments and potentially stronger domestic liquidity growth, due to expectations of further capital inflows, posed upside risks to the inflation outlook.
The board said the reduction in the SDA rate is consistent with the central bank's continuing efforts to fine-tune the operation of its monetary policy tools. The benign inflation outlook and improving growth prospects provide room for the reduction in the SDA rate, it added.
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