High interest rates? Philippine money supply growth in May accelerated anyway

The growth of cash and “near cash” items in the Philippine financial system continued to accelerate in May despite the prevailing high interest rate regime that is supposed to rein in money supply and, as a consequence, inflation.

In a statement on Friday, the Bangko Sentral ng Pilipinas said its preliminary data revealed that the Philippine domestic liquidity (or “M3” in economic jargon) expanded by 6.5% year-on-year to approximately P17.4 trillion in May, up from 5.6% in April.

On a month-on-month seasonally-adjusted basis, domestic liquidity increased by about 1.1%. This growth persists despite the central bank's tight monetary policy stance.

Domestic claims rose by 10.7% year-on-year, consistent with the previous month's revised figures.

The private sector saw an 11.6% increase in claims in May, up from April’s 10.9% revised growth, driven by sustained bank lending to non-financial corporations and households.

Net claims on the central government grew by 12.2%, slightly down from 13.9%, due to the national government’s continued borrowings.

In a statement, BSP Governor Eli Remolona Jr. said the central bank remains committed to maintaining domestic liquidity conditions aligned with its monetary policy stance to ensure price and financial stability.