Money supply grows 13.5% to P10 T
Liquidity in the financial system posted a double-digit expansion in July due to the strong demand for credit in support of the country’s growing economy, according to the Bangko Sentral ng Pilipinas (BSP).
BSP Governor Nestor Espenilla Jr. said money supply or M3 grew at a faster rate of 13.5 percent in July from the revised 13.3 percent in June.
“Demand for credit remained the principal driver of money supply growth,” Espenilla said.
He reported the amount of money circulating in the financial system reached P9.97 trillion in end-July, P1.18 trillion higher than the P8.78 trillion in end-July last year.
Espenilla said liquidity growth remains in line with the BSP’s prevailing outlook for inflation and economic activity.
“Going forward, the BSP will continue to closely monitor monetary conditions in order to ensure that domestic liquidity stays adequate to support the BSP’s price and financial stability objectives,” he said.
The BSP has set an inflation target of two to four percent but expects inflation to average 3.2 percent this year and next year as well as 3.1 percent in 2019.
Economic managers, on the other hand, see the gross domestic product (GDP) expanding between 6.5 percent and 7.5 percent this year and seven to eight percent in 2018.
Authorities continued to siphon off excess liquidity in the financial system through various tools introduced during the launching of the interest rate corridor (IRC) framework in June last year.
Last Wednesday, the BSP slashed the volume of the term deposit auction facility (TDF) to P150 billion consisting of P110 billion worth of 28-day term deposits and P40 billion worth of seven-day term deposits as banks opt to channel excess funds to loans and investments.
The TDF serves as the main tool for absorbing liquidity and promotes the establishment of benchmarks for shortterm interest rates.
The level of liquidity is one of the factors being considered by monetary authorities aside from domestic demand and inflation in setting the country’s policy rates.