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MONETARY
authorities hate to admit that fast-rising money supply
growth—as borne by latest M3 data at end-March showing
further acceleration to 24.6 percent from only 22.4
percent a month earlier—is making them all fidgety.
The
sustained acceleration comes at a time when inflation
was seen to have definitely bottomed out, rising to 2.3
percent in April after having approximated a first-world
inflation rate of 2.2 percent in March.
Low and
stable inflation is the Bangko Sentral ng Pilipinas’
holy grail, but the rapid acceleration in money supply
could easily undo what monetary officials have put in
place to ensure growth averaging at least 6.1 percent
this year.
The BSP
cannot allow inflation to range beyond 4 percent this
year as programmed or risk explaining its failure to
rein it in to President Arroyo, as required by law,
while convincing the public of their potency or
effectiveness as monetary officials.
Failure
will compel the BSP to jack up interest rates and punish
everyone, rich or poor, with higher cost of money. The
central bank has so far avoided that by resorting to
other monetary tools at its disposal.
BSP
Governor Amando M. Tetangco Jr., however, was confident
on Friday the antiliquidity measures that kick in
starting May 10 should achieve the goal of slowing down
M3 growth “lower than 20 percent” again.
Faster-than-anticipated M3 growth has been galloping the
past four months, or a fourth of the maximum time under
which it can be manipulated so that the economy does not
revert to a regime of high inflation.
According to Tetangco, the decision allowing the various
trust units to avail themselves of the BSP’s special
deposit account facility “should significantly lower the
amount of excess liquidity in the system.”
Trust
units have never been allowed to participate in any BSP
facility until the new rules kick in on May 10, and the
expectation is that the bulk of excess liquidity should
be siphoned off by then.
“We
estimate at least 75 percent of excess liquidity in the
system will be siphoned off,” Tetangco said.
No one
likes to say it for the record, but some sources claimed
some P500 billion or P600 billion worth of funds should
wind their way back to the BSP and no longer wreak havoc
on the now overheating financial system.
Tetangco
had fewer things to say about the plan that entices
government-owned or -controlled corporations such as the
Government Service Insurance System and the Social
Security System to come and deposit their cash assets
with them.
“We will
offer a market-determined interest rate to encourage
them to deposit their money with us instead.
We will
set it lower than our overnight borrowing rate,”
Tetangco said.
This
means the BSP is prepared to pay the GSIS and SSS
returns lower than 7.5 percent, hardly comforting for
GSIS chief Winston Garcia, who said in prior interviews
that the GSIS earns an average of 11 percent off its
investment portfolio. |
