keeping inflation at bay.
Domestic liquidity, or M3, rose 28.4 percent from the year-earlier level, bringing the total amount of cash and cash-equivalent securities circulating within the economy during the period to
The Bangko Sentral ng Pilipinas (BSP) on Monday said the rate of expansion has slowed from the 32.1 percent increase recorded in April.
Month-on-month, seasonally adjusted M3 was "broadly steady" in the month following a revised 0.3-percent rise in the month earlier.
"As in previous months, the strong, though decelerating, M3 growth reading in May continued to reflect the decline in the SDA [special deposit account] placements of trust entities compared to their levels a year ago, in line with the BSP's operational adjustments in the SDA facility," the BSP said.
The central bank recently raised the rate on the SDA--a monetary facility employed by the BSP to manage excess liquidity in the financial system.
The increase in the SDA interest rate and the recent adjustments to the reserve requirement ratio for banks are expected to help mitigate potential risks to consumer
prices and financial stability that could emanate from strong liquidity growth.
The BSP's Monetary Board over the last three consecutive monetary policy meetings has made adjustments to two of it policy levers to curb growth in money supply as a means to tame inflation and maintain stability in the financial system.
The Board decided at its
In an e-mail to The
Mapa sees money supply decelerating further in the coming months.
"RRR adjustments have made their way to affect the amount of liquidity in the system. M3 will continue to decelerate, and finally normalize as soon as the base-effect kicks in, after last year's sharp mid-year spike," he said.
Still, M3 growth remained high at 28.4 percent, which, central bank explained, was due to "sustained demand for credit in the domestic economy."
BSP data shows that domestic claims during the month rose 11.8 percent from a year earlier as bank lending gained pace, offset only slightly by a 0.2 percent contraction in public sector credit as national government deposits increased.
Net foreign assets (NFAs), or the net position of the central bank relevant to transactions with nonresidents, expanded by 5 percent in peso terms.
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