Liquidity growth steady in Oct

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) reported yesterday a steady growth in money supply in October as monetary authorities continued to siphon off excess liquidity in the financial system with the introduction of the interest rate corridor (IRC) framework last June.

BSP officer-in-charge Nestor Espenilla Jr. said the money supply (M3) expanded 12.8 percent to P8.92 trillion in October from P7.91 trillion in the same period last year.

Espenilla said the growth in October was steady from the 12.7 percent expansion recorded in September.

Espenilla said the growth in money supply remains manageable and consistent with the BSP’s current outlook for inflation and economic activity.

“Moving forward, the BSP will continue to closely monitor monetary conditions to ensure that overall domestic liquidity dynamics stay in line with its price and financial stability objectives,” he said.

The BSP shifted to the IRC system last June 3 with the adjustment in key policy rates. The implementation of the IRC system was part of key changes in the framework for monetary operations designed to enhance the effectiveness of monetary policy.

The IRC system calls for the shift to the use of floor and ceiling rates for short-term financing to be determined through the auction of seven- and 28-day deposit maturities initially set at once a week.

The TDF serves as the main tool for absorbing liquidity and promotes the establishment of benchmarks for short-term interest rates.

Starting tomorrow, the BSP is set to auction P180 billion worth of term deposits consisting of P30 billion worth of seven-day term deposits and P150 billion worth of 28-day term deposits.

This is the sixth time the central bank is raising the size of the weekly auction of seven- and 28- day term deposits since the facility was launched last June 8 with an original of P30 billion.