MANILA, Philippines - The Bangko Sentral ng Pilipinas said it is closely watching developments in advanced economies to see how these would affect domestic liquidity dynamics.
“Right now, what we’re looking at is the impact of all these developments in advanced economies on capital flows and how this will possibly affect liquidity,” BSP Governor Amando M. Tetangco Jr. said during the Management Association of the Philippines’ general membership meeting.
“We don’t want it (liquidity growth) to go down too much because we need to provide enough resources to the real economy but at the same time, you’ve got capital inflows which will serve to expand liquidity,” Tetangco said.
Latest BSP data showed M3 – the broadest measure of liquidity – grew 9.6 percent to P7.59 trillion in December.
The growth rate hit 30 percent in July 2013 and remained above that level for another nine months due to reductions in the Special Deposit Account rate and restriction of singular fund accounts in the facility.
M3 expansion slid below 20 percent in July 2014 before easing under 10 percent in November last year. This was owed to the BSP’s policy actions increasing the reserve requirement ratios of banks and the SDA rate in the first half of last year to pull down excessive liquidity growth.
Tetangco said growth prospects across the globe remain uneven, while monetary policy stances also differ in each economy.
The International Monetary Fund in January cut its projection for global economic output by 0.3 percent to 3.5 percent for this year and by 0.3 percent to 3.7 percent in 2016.
The downward revisions came following weaker prospects for China, Russia, the euro area, and Japan. The United States was the only major economy given a higher growth projection.
Central banks have been adopting different monetary policy stances due to the uneven growth among economies, Tetangco said.
The US Federal Reserve, for one, is seen raising interest rates this year, while its counterpart in Japan and the euro area are easing monetary conditions to combat deflation and pump money in their economies.