The central bank is optimistic that growth in the country’s money supply will continue to moderate, averting a worsening of inflation in the months ahead as the recent series of monetary policy actions take effect in mopping off excess liquidity from the financial system.
“We can say at this point that because of the previous monetary measures that the BSP has implemented, including the adjustment in the reserve requirement ratio [RRR], special deposit account [SDA] rates and in the policy rates, we should be able to see continued or sustained moderation in the growth of domestic liquidity,” Diwa Guinigundo, deputy governor at the Bangko Sentral Pilipinas (BSP), said.
Domestic liquidity or M3 is the total amount of cash and cash-equivalent securities circulating within the economy.
The Monetary Board, at its March 27 meeting, raised the RRR for banks to 19 percent, then further to 20 percent at its May 8 meeting in a bid to siphon off excess liquidity from the financial system. On June 19, the policy-making body increased the rate on the SDA facility by 25 basis points to 2.25 percent.
At its July 31 meeting, the Board raised its two key interest rates by 25 basis points each then further by another 25 bps on September 11. The rate for the overnight borrowing, or reverse repurchase facility now stands at 4.0 percent, up from the previous 3.75 percent, and the rate for overnight lending, or repurchase facility, has been raised from 5.75 percent to 6.0 percent.
The interest rate paid on SDA was also hiked to 2.50 percent from 2.25 percent.
The latest data from the central bank showed that domestic liquidity reached P7.1 trillion in August, rising 18.5 percent from the year-earlier level.
“We expect that this will continue to ease given the monetary measures we implemented in the past,” Guinigundo concluded.