The country’s money supply grew at its fastest pace in nearly a decade amid the release of nonpooled funds from the central bank’s special deposit accounts (SDA) and the continued expansion of the Philippine economy.
Monetary officials, however, shrugged off the increase in domestic liquidity, or M3, as a temporary spike, dispelling market fears that the excess liquidity would lead to an acceleration in the rise of consumer prices.
M3 growth accelerated to 30.1 percent at the end of July, faster than the 20-percent expansion the month before. This came as bank lending continued to slow to 11.7 percent in July from 13 percent in June.
“As expected, the operational adjustment of its SDA facility has also led to the substantial rise in M3 for July,” the Bangko Sentral ng Pilipinas said in a statement at the weekend.
The BSP earlier ordered financial institutions to pull out nonpooled funds out of the SDA facility, which was originally meant as a tool used to mop up liquidity to rein in inflation.
Banks should have removed at least 30 percent of these funds at the end of July. The remaining 70 percent should be out by November this year.
The BSP said M3 growth was expected to decelerate once these adjustments are completed. “A temporary period of high M3 growth is therefore not expected to translate into significant inflationary pressures,” the BSP said.
“Latest baseline forecasts of the BSP continue to show that inflation will remain manageable over the policy horizon even with the stronger pace of growth in domestic liquidity in the next few months,” it added.
The BSP also announced on Friday that it has implemented a new, more detailed methodology in computing M3 based on the Standardized Report Forms (SRF) system.
The adoption of SRF-based monetary statistics is consistent with the framework of the Monetary and Financial Statistics Manual, the Balance of Payments and International Investment Position Manual 6th edition and the System of the National Accounts of the International Monetary Fund.