Money supply growth eased in May
Growth in the amount of cash circulating in the economy decelerated to its slowest in nearly a year as adjustments in monetary settings started to take hold, data released by the central bank on Monday showed.
The Bangko Sentral ng Pilipinas (BSP) said the slowdown would help mitigate risks to financial and price stability that excess liquidity might cause. Despite getting its desired effect, the BSP said it remained ready make further adjustments in policy settings to ensure that domestic liquidity or M3 growth stayed low.
“The BSP stands ready to undertake further measures as necessary to ensure that liquidity dynamics stay in line with the BSP’s price and financial stability objectives,” a statement read.
M3 growth eased to 28.4 percent in May, slower than April’s 32.1 percent, the BSP reported. This growth in May was the slowest since June last year. Growth in M3 reached a record high 37 percent earlier this year.
Elevated growth rates in M3 followed the restrictions on individual investments from the BSP’s special deposit accounts (SDA), which took effect last November.
The BSP expects that as a result of recent policy moves, M3 growth rates should continue to decline to “normal” levels toward the end of the year.
In April and May, the BSP asked local banks to set aside more of their clients cash as reserves. Last month, the BSP also raised yields on SDAs to encourage banks to park more funds in central bank vaults.
“The recent increase in the interest rate on the SDA facility as well as the earlier adjustment in the reserve requirement of banks are seen to help mitigate potential risks to price and financial stability that could emanate from strong liquidity growth,” the BSP said.
Meanwhile, in a separate statement, the BSP said bank lending rose by 21.1 percent in May, faster than the previous month’s 20.8 percent. Loans that financed productive activities such as real estate, wholesale and retail trade, manufacturing, and financial intermediation, made up about 80 percent of total disbursements, the BSP said. Paolo G. Montecillo
