MONETARY POLICY OF

BANGKO SENTRAL
NG PILIPINAS
Mel

WHAT IS MONETARY POLICY

(Philippine Setting) ?

set of GUIDELINES and PLANS of action designed to achieve

stability and reliability of the financial system in order to
automatically responds and adjusts to the changes and
dynamics of an economy

used by the government to be able to control inflation, and

stabilize currency

the process by which the central bank, or government

controls the supply and availability of money, the cost of
money, and the rate of interest

TERMS:
INFLATION RATE- rate of change in the
weighted
average prices of
goods and
services typically
purchased by
consumers
INFLATION TARGET- level of inflation which
the BSP
aims to achieve over a given period
under the inflation targeting
framework

Monetary Policy Tools

OPEN MARKET OPERATIONS
Repurchase and Reverse Repurchase
REPURCHASE (RP) RATE - policy interest rate at which the
BSP lends
to banks with government securities as collateral

REVERSE REPURCHASE (RRP) RATE - policy interest rate at

which the
BSP borrows from banks with
government securities as collateral

 Outright Transactions direct purchase / sale of

government
securities from / to banks
- DOES NOT commit to reverse purchase
transactions
Foreign Exchange Swaps
Involves actual exchange of two currencies
(principal amount only) on a specific date at a rate
agreed on the deal date (the first leg), and a reverse
exchange of the same two currencies at a date further
in the future (the second leg) at a rate (different from
the rate applied to the first leg) agreed on deal date

ACCEPTANCE OF FIXED-TERM DEPOSITS

Special Deposit Accounts (SDA)
Consists of fixed-term deposits by bans and by trust
entities of banks and non-bank financial institution with
BSP

REDISCOUNTING
Allows a financial institution to borrow money from BSP
using promissory notes and other loan papers of its
borrowers as collateral

RESERVE REQUIREMENTS
The percentage of bank deposits and deposit substitute
liabilities that banks must set aside in deposits with the
BSP which they cannot lend out, or where available
through reserve-eligible government securities

Monetary Board
Armando M. Tetangco, Jr., Governor and Chairman
of the Monetary Board
Alfredo C. Antonio, Monetary Board Member
Valentin A. Araneta, Monetary Board Member
Felipe M. Medalla, Monetary Board Member
Cesar V. Purisima, Monetary Board Member
Armando L. Suratos, Monetary Board Member
Juan D. De Zuiga, Jr, Monetary Board Member

Philippine Monetary Policy

HIGHLIGHTS OF THE MEETING OF THE

MONETARY BOARD ON MONETARY POLICIY
ISSUES HELD ON 26 MARCH 2015
I. Monetary Policy Decision

The Monetary Board(MB) decided to:

a.) Maintain the BSPs key policy interest rates at
4.00% for the overnight RRP(borrowing) facility
and 6.00% for the overnight RP(lending) facility;
b.) Maintain the current interest rates on
term RRPs, RPs, and SDAs;
c.) Maintain the current reserve requirement
ratios

II. keY CONSIDERATIONS IN THE FORMULATION OF

THE MONETARY POLICY STANCE

The MBs decision was based on its assessment

that the inflation environment continues to be
manageable
Inflation settle within lower half of the target
range
Domestic demand conditions remain robust
Higher public spending supports economic activity
(expected)

Federal Reserve
Open Market
Operations
- Federal Reserve
purchases
- Sales of Financial
Instruments

Bangko Sentral ng Pilipinas

Open Market Operations
- Repurchase (overnight lending); Reverse
Repurchase (overnight borrowing)
- Outright Transactions
- Foreign Exchange Swaps

Discount Rate
0.13% (as of April 2015)

Rediscounting
4.088% (as of March 2015)

Reserve Requirements
- Net Transaction
accounts
more than $14.5M to
103.6M:
3% of liabilities
more than 103.6M:
10% liabilities

Reserve Requirements
- Non-Banks with Quasi-Banking Function
Against Deposit Substitutes: 20%
Against Common Trust Funds & TOFA: 20%;
17%
- Commercial Banks
A. Against PESO Liabilities and Deposit Sub:
20%
B. Against Common Trust Funds & TOFA: 20%;
17%
- Thrift Banks
A. Against PESO Liabilities and Deposit Sub:
8%
B. Against Common Trust Funds and TOFA: 9%
- Rural Banks