At its meeting on monetary policy today, the Monetary Board decided to keep the BSP's Target Reverse Repurchase (RRP) Rate unchanged at 6.50 percent. Accordingly, the interest rates on the overnight deposit and lending facilities will be maintained at 6.0 percent and 7.0 percent, respectively.

The latest projections indicate that the inflation outlook has moderated over the policy horizon. The risk-adjusted inflation forecasts remain above the target for 2024 at 4.4 percent (from 4.7 percent in the previous meeting in October) and within the target for 2025 at 3.4 percent (from 3.5 percent). The BSP survey of external forecasters shows that inflation expectations for 2024 rose above the target range in the October 2023 survey and have declined to the upper bound of the target in the November survey, while remaining anchored for 2025. Supply-side inflation pressures continue to ease due in part to the National Government's non-monetary interventions as well as seasonal factors.

Nevertheless, the balance of risks to the inflation outlook still leans significantly toward the upside, notwithstanding the recent improvement in food supply conditions. Key upside risks are associated with the potential impact of higher transport charges, electricity rates, and international oil prices, as well as of higher-than-expected minimum wage adjustments in areas outside the National Capital Region. Meanwhile, the impact of a weaker-than-expected global recovery as well as government measures to mitigate the effects of El Niño weather conditions could reduce the central forecast.

Given these considerations, the Monetary Board noted that keeping the policy rate steady will allow previous policy interest rate adjustments, including the interest rate increase in October, to continue to work their way through the economy.  On balance, the rebound in Q3 GDP growth supports the view that the country's medium-term growth prospects remain largely intact, even as pent-up demand continues to diminish in the near term. The BSP will also continue to assess how firms and households are responding to tighter monetary policy conditions, especially as credit growth continues to moderate. The Monetary Board reiterates its support for the National Government’s efforts to sustain growth through programmed spending, as well as non-monetary intervention measures to mitigate the impact of lingering supply-side factors on inflation.

Looking ahead, the Monetary Board continues to deem it necessary to keep monetary policy settings sufficiently tight until a sustained downtrend in inflation becomes fully evident and inflation expectations are firmly anchored. Guided by incoming data, the BSP remains prepared to resume monetary policy tightening as necessary to steer inflation towards a target-consistent path, in line with its price stability mandate.