Growth in the country’s money supply in October eased to a year-on-year rate of 15.4 percent from the previous month’s annual expansion of 16.2 percent, in line with the government’s mopping up operation, the central bank said on Friday.
The Bangko Sentral ng Pilipinas (BSP) said it expects domestic liquidity growth to moderate further in the months ahead as recent monetary policy adjustments continue to work their way through the economy.
Domestic liquidity or M3—which measures the total amount of cash and cash-equivalent of securities circulating within the economy—reached P7.2 trillion in October, BSP data from the Bangko Sentral ng Pilipinas (BSP) released on Friday showed.
The seasonally adjusted M3 in October increased by 0.9 percent on a month-to-month basis, compared with the previous month’s 0.3 percent growth.
Money supply growth decelerating
The M3 indicator has been on a declining growth trend since January this year when it stood at a high of 37.3 percent. The exception was only from July to August, when M3 growth showed a slight acceleration from 17.9 percent to 18.3 percent.
In a bid to mop up excess liquidity from the financial system, the Monetary Board of the BSP hiked the reserve requirement ratio for banks to 20 percent at its May 8 meeting. On September 11, the policy-setting body raised the rate paid on the special deposit account facility by 25 basis points to 2.50 percent from 2.25 percent.
At its October 23 meeting, the Monetary Board decided to keep the 2.5 percent interest rate for SDA and the 20-percent RRR for banks unchanged.
“Going forward, the BSP remains prepared to take appropriate action as necessary to ensure that monetary conditions continue to support price and financial stability,” the central bank said.
Domestic claims in October rose 18.2 percent from 16 percent in September, reflecting in part the continued expansion in credit to the private sector, the BSP said.
The bulk of the bank loans during the month were channeled into key production sectors such as manufacturing, real estate, renting, and business services, wholesale and retail trade, utilities, and financial intermediation.
At the same time, public sector credit grew 19.1 percent in October from 12.9 percent in September as the deposits of the national government with the central bank decreased, “due largely to the withdrawal of funds by the NG [national government]for the redemption of maturing government securities and the release of the internal revenue allotment funds to local government units,” the BSP said.
Net foreign assets, or the net position of the central bank relevant to transactions with non-residents, grew at a slower pace of 3.4 percent in peso terms, the central bank also noted.