In a statement, the agency said that preliminary data showed money supply or “M3” grew by 6.6% year-on-year in June, reaching approximately ₱17.5 trillion.
This follows a 6.5% increase in May. The last time this year that money supply grew at or above the 6% threshold was in January following a stronger surge in the last few months of 2023.
The BSP attributed the latest growth rate to a 10.5% expansion in domestic claims and an 8.3% rise in net foreign assets.
Claims on the private sector continued to grow, reflecting robust bank lending to non-financial private corporations and households.
The national government's sustained borrowing also played a significant role.
Including dollar deposits, there are some P20.6 trillion in liquidity circulating in the Philippine financial system as of the central bank’s June data.
Why this matters
A steady and sustainable pace of liquidity growth is important to feed a growing economy.
Readily available cash encourages companies and entrepreneurs to expand their business operations and hire workers which, in turn, propels thus boosting economic growth.
However, too much liquidity can fuel inflation if there is too much cash in people’s hands chasing after the same goods, encouraging sellers to raise prices.
The prevailing high-interest rate regime was put in place in the wake of the coronavirus pandemic to counteract the inflationary effects of massive amounts of cash infused by regulators into the financial system to stave off a recession.
“The BSP will continue to ensure that domestic liquidity conditions remain consistent with the prevailing stance of monetary policy, in line with its price and financial stability objectives,” Governor Eli Remolona Jr. said in his statement.
