|
DOMESTIC
liquidity growth, known as M3 among economists,
accelerated further to 26.3 percent in April and marked
the fifth time in a series this has grown at the
worrisome and rather unwanted clip of above 20 percent.
Still,
monetary authorities deemed it better to keep the policy
rates unchanged.
If
unchecked, the growing supply of money in the hands of
every working Filipino translates to higher inflation
down the line and puts a damper on growth seen
accelerating as high as 6.1 percent this year in terms
of the gross domestic product.
This was
the fastest M3 growth yet this year, Bangko Sentral ng
Pilipinas deputy governor Diwa C. Guinigundo
acknowledged in a mobile phone message to the
BusinessMirror on Thursday.
M3
growth hit a high of 45.4 percent in April 1995, a year
when domestic liquidity growth in the 30-percent level
was common, BSP Governor Amando M. Tetangco Jr. said.
But the
seven-member monetary board that decides policy at the
BSP considered the threat posed by continued M3
expansion in April as insufficient ground to adjust the
current monetary policy settings.
In a
statement, Tetangco said the overnight borrowing rate
remains at 7.5 percent and the overnight lending rate
still at 9.75 percent.
Had the
continued M3 growth in April been considered a threat to
the stability of prices 15 to 21 months down the line,
the Monetary Board would have already made the
adjustments such as appropriately increasing its
borrowing rate to bring back some of the extra peso
liquidity to the vaults of the BSP.
Adjustments in policy rates are one of several monetary
policy options available to the BSP.
“The
Monetary Board assessed that the outlook for inflation
over the policy horizon continues to be benign, due
mainly to easing supply-side pressures, moderate demand
pressures and well contained inflation expectations,”
said Tetangco, who chairs the Monetary Board.
Ample
food supply of major food items, the subsiding impact of
the higher value-added tax rate of 12 percent and the
strong peso all contributed to the continued downtrend
in inflation, according to Tetangco.
But he
and the rest of the Monetary Board have raised the red
flag over the still-accelerating M3 growth and the havoc
this creates on price stability down the line if this
was not successfully contained.
“Sustained growth in domestic liquidity remains a key
policy concern,” Tetangco said.
He and
Guinigundo said earlier the immediate goal is to lower
M3 growth to below 20 percent the soonest.
This was
why, Tetangco said, the tiering system on bank
placements with the BSP was kept in place, including
placements by trust entities called special deposit
accounts, or SDAs.
That
system was put in place in November last year as a
symbol of a more relaxed monetary policy stance, even
though some have suggested scrapping the mechanism.
Factors potentially causing inflation to move up over
the near term also include the volatile oil prices and
additional wage adjustments sought by the labor sector. |
