THE Bangko Sentral ng Pilipinas (BSP) siphoned off around P1.3 trillion in excess liquidity from the financial system in June, ensuring that short-term market interest rates remained aligned with its policy stance despite tighter monetary conditions.
In its June 2026 Monetary Policy Report, the central bank said its monetary operations effectively kept the overnight reverse repurchase (RRP) rate closely tracking the target RRP rate.
The BSP has kept monetary policy tight as it seeks to bring inflation back within target following renewed price pressures earlier this year.
As of June 9, the central bank had absorbed P1.3 trillion through its various monetary facilities, with the overnight RRP facility accounting for the largest share, or 52.3 percent, of total placements.
The remainder of the liquidity absorption was conducted through the overnight deposit facility, which accounted for 21.5 percent of placements, followed by BSP securities at 19.2 percent and the term deposit facility at 6.9 percent.
“The BSP’s monetary operations effectively kept the overnight reverse repurchase rate aligned with the target reverse repurchase rate,” the central bank said.
The BSP implements monetary policy primarily through the RRP rate, which serves as the policy rate.
The RRP rate sits at the middle of the interest rate corridor while the overnight deposit and lending facilities set the lower and upper bounds to help steer short-term market interest rates toward the policy rate.
To ensure its policy decisions are transmitted across the financial system, the BSP also uses various liquidity management tools, including the term deposit facility (TDF), open market operations and BSP securities.
It also provides forward guidance to help shape market expectations and reinforce the impact of monetary policy on the broader economy.
The central bank said policy rate transmission remained effective following a 25-basis-point policy rate increase in April.
Interest rates on its 7-day term TDF and 28-day BSP bills fully reflected the rate hike, indicating that financial markets quickly adjusted to the tighter monetary stance.
As of June 10, the 7-day TDF rate stood at 4.439 percent while the yield on the 28-day BSP bill reached 4.584 percent as of June 5, closely mirroring the increase in the policy rate.
The BSP has moved to a single-tenor offering for its term facilities to streamline its liquidity instruments and focus on tenors that better support policy transmission, while retaining the seven-day term deposit facility and 28-day BSP bill.
The BSP’s benchmark rate currently stands at 4.75 percent, with the overnight deposit facility at 4.25 percent and the overnight lending facility at 5.25 percent.
