High interest rates failed to deter PH money supply expansion in April

High interest rates imposed by the central bank to combat inflation made only a small dent on the the amount of cash and “near cash” assets circulating in the Philippine financial system, with this key metric continuing to grow at a healthy clip in April.

In a press statement, the Bangko Sentral ng Pilipinas said its preliminary data indicated that domestic liquidity — also called “money supply” or M3” by economists — in the Philippines grew by 5.6% year-on-year to approximately ₱17.2 trillion in April, despite the tight monetary policy regime imposed by the regulator.

This marked only a slight decrease from the 5.7% growth observed in March. On a seasonally-adjusted month-on-month basis, money supply rose by 0.5%.

A large amount of cash circulating in the financial system aggravates inflation as more money chases after the same amount of goods and services, encouraging sellers to raise their prices.

Domestic claims increased by 10.6% year-on-year in April, with private sector claims growing by 10.8%. Net claims on the central government rose by 13.9%, partly due to decreased national government deposits with the BSP. 

The BSP said will continue to align domestic liquidity conditions with its monetary policy stance to maintain price and financial stability.