Money supply growth seen to ease

The growth of the country’s money supply could have started to decelerate to more normal rates last December, which should help ease jitters over inflationary pressures in financial markets, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP said that domestic liquidity, or M3, growth rates had hit record levels in November.

“In December, [growth of money supply] slowed down already. The adjustments of special deposit accounts (SDA) are done,” BSP Deputy Governor Diwa C. Guinigundo said late last week.

Latest central bank data showed that M3 grew by a record 36.5 percent in November, coinciding with the start of the complete ban on all nonpooled funds from the central bank’s SDA window.

The growth in liquidity in November was faster than the 32.5-percent growth rate recorded the month before.

About P800 billion in cash were withdrawn by banks from the BSP’s SDA window since the ban on investment management accounts (IMA) was first announced in the first half of 2013.

When it announced the ban in May 2013, the central bank said 30 percent of the covered funds had to be unwound by July that year, while the remaining 70 percent was ordered withdrawn by November.

Apart from the ban on individual investments, the BSP also reduced interest rates on SDAs to a record low of 2 percent across all maturities, making it less profitable for investors to park their funds in the liquidity-management window.

Guinigundo said domestic liquidity should be expected to grow at elevated levels, even without the adjustments in SDAs, due to the country’s economic expansion, which fuels demand for bank loans from businesses and households.

“Higher domestic claims or loans are consistent with a growing economy,” he told reporters.

Outstanding loans of commercial banks, net of reverse repurchase (RRP) placements with the BSP, grew by 14.8 percent in November from the previous month’s expansion of 13.6 percent.

Similarly, the growth of bank lending inclusive of RRPs expanded by a faster pace of 13.8 percent from 13.5 percent the previous month.