By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) reported that in July, domestic liquidity or M3 expanded by 11 percent year-on-year to P11.1 trillion.

Compared to June data, M3 growth slowed down from 11.8 percent however on a monthly and seasonally-adjusted basis, liquidity was by 0.6 percent.

“The overall growth in M3 remains in line with the BSP’s prevailing outlook for inflation and economic activity,” the central bank said in a statement. “The BSP will continue to closely monitor domestic liquidity dynamics to ensure that monetary conditions remain conducive to maintaining price and financial stability.”

During the period, domestic claims were up 16.1 percent while net claims on the central government also rose at a slower pace of 12.3 percent “even as borrowings by the National Government continued to increase,” said the BSP.

Net foreign assets (NFA) in peso terms slightly increased in July or by 0.1 percent year-on-year versus 2.8 percent in June. “The BSP’s NFA position declined in July relative to June, reflecting the decrease in gross international reserves. Meanwhile, the NFA of banks also continued to increase, albeit at a slower pace, as a result of higher loans and investments in marketable debt securities,” said the BSP.

In the BSP’s analytical terms, M3 refers to M2 – which are quasi-money with currency in circulation and demand deposits with banks (or M1) – plus deposit substitutes, or short-term borrowings other than deposits.

The control of money supply is a central bank function and the managing of overall domestic liquidity is done primarily through effective open market operations, as well as banks’ reserve ratios.