The Philippine central bank will shift its reverse repurchase operation (RRP), which currently uses a fixed-rate, to a variable-rate auction format from Sept. 8, it said on Monday, to enhance monetary policy transmission to the economy.

Shifting to a variable-rate auction format, the central bank said, would also strengthen the price discovery process by providing market players and monetary authorities a market-determined interest rate that conveyed the prevailing cost, of and demand for, overnight funds.

The market-determined rate for overnight funds, the central bank said, would be called the "Overnight (ON) RRP Rate", that would show the results of the daily RRP auctions.

The ON RRP rate is expected to move closely around the central bank's benchmark interest rate, which it will now call the "Target RRP Rate" and which will continue to be set by the policy-making Monetary Board at its rate-setting meetings every six weeks.

"They are largely operational in nature and do not constitute any shift in the BSP's monetary policy stance," the central bank said in a statement. (Reporting by Karen Lema; Editing by Alex Richardson)