The growth in the country’s money supply accelerated further in September due to the transfer of cash from the central bank’s special deposit accounts (SDA) to time deposits in banks.
Banks also increased their lending to the public, indicating strong demand for cash from households and businesses, driven by the country’s booming economy.
Domestic liquidity or M3 increased by 31 percent at the end of September to reach a record-high of P6.2 trillion, the Bangko Sentral ng Pilipinas (BSP) said. This was faster than the 30.9-percent growth in August.
“It will be recalled that the BSP has required trust entities to reduce their SDA placements that are inconsistent with the revised BSP SDA guidelines by November,” the regulator said in a statement.
The BSP earlier ordered the withdrawal of individual investments from its SDA facility. Banks were ordered to withdraw 30 percent of these funds last July. The remaining 70 percent will be withdrawn in November.
“The fine-tuning of the SDA facility is aimed at encouraging financial institutions to deploy their funds in the domestic financial markets and to help finance economic activity,” the BSP said.
BSP Governor Amando M. Tetangco Jr. said growth in money supply may stay elevated until late 2014 as the economy adjusts to the availability of extra funds that left SDAs.
However, these extra funds are not expected to push consumer prices up since most of the cash will likely find their way into low-risk investments, in line with the risk profile of SDA investors.
Growth in bank lending in September also contributed to the spike in M3 growth for the month.