Cash lodged with BSP continues to decline

THE AMOUNT of cash in the central bank’s special deposit accounts (SDA) continued to fall at the end of December, despite recent hikes in yields aimed at mopping up cash from the economy.

Senior monetary authorities remained confident that even as cash exits SDAs—one of the Bangko Sentral ng Pilipinas’ (BSP) main monetary sterilization tools—growth in domestic liquidity would remain muted.

Data from the BSP showed money in SDAs as of Dec. 24, 2014 stood at P893 million, down from P959.79 million the week before.

This came despite the hikes in SDA rates to 2.5 percent across all maturities implemented in 2014. In December of 2013 cash in SDAs stood at P1.37 trillion.

Even as cash continued to exit SDAs, BSP Deputy Governor Diwa C. Guinigundo said he was confident that money supply growth rates would remain manageable.

“We believe because of base effects and previous policy moves, we can continue to see greater normalization of monetary policy,” he said.

“We should also make the point that the stock of liquidity is just right,” he said, noting there was enough cash in the economy to fuel economic growth.

In November, domestic liquidity or M3 growth slowed to 9 percent from 15.4 percent the month before. Month-on-month, M3 was down 1.2 percent. This was below the 12- to 15-percent range considered “normal” by authorities.

Cash in SDAs peaked in April 2013 to more than P2 trillion amid the availability of liquidity in the economy and the scarcity of investment options in the country.

To push money out of SDAs, the BSP introduced a ban on non-pooled funds in investment management accounts (IMA) held by banks for their clients that took effect late 2013.