Monetary Policy Stance: 15 August 2024
Monetary Board Reduces Target RRP Rate by 25 Basis Points
August 15, 2024
At its monetary policy meeting today, the Monetary Board decided to reduce the BSP’s Target Reverse Repurchase (RRP) Rate by 25 basis points to 6.25 percent. The interest rates on the overnight deposit and lending facilities were accordingly adjusted to 5.75 percent and 6.75 percent, respectively.
Headline inflation is projected to trend downward to within the government’s 2 ‑ 4 percent target range despite the uptick in July. The risk-adjusted inflation forecasts for 2024 and 2025 now stand at 3.3 percent and 2.9 percent, respectively. Meanwhile, the risk-adjusted forecast for 2026 is 3.3 percent. This outlook is supported by well-anchored inflation expectations over the policy horizon.
The balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025 with a modest tilt to the upside for 2026. The downside risks are linked mainly to lower import tariffs on rice, while upside risks could come from higher electricity rates and external factors.
The Monetary Board also expects domestic demand prospects to hold firm. Despite tight financial conditions, second-quarter GDP growth has been solid and the unemployment rate has declined. Public investment alongside easing price pressures and robust employment conditions are expected to support economic activity.
With inflation on a target-consistent path, the current macroeconomic outlook supports a calibrated shift to a less restrictive monetary policy stance. Nonetheless, monetary authorities remain mindful of lingering upside risks to prices.
Going forward, the Monetary Board will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment.
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