The Central Bank claims it mopped up PhP20 billion in excess liquidity by raising yields on its SDA (Special Deposits Account). Ostensibly, by using this facility instead of the T-bill auctions, the monetary authorities hope to contain M3 or money supply growth (i.e. currency in circulation, savings, demand deposits, small denomination time deposits, repurchase agreements, etc.) which reached 26% in April, without necessarily pushing commercial lending rates upwards. Most banks use the T-bills and the BSP's overnight rates in determining the prime rates.
The operative word here is "excess". As such, mopping up the extra PhP20 billion circulating in the economy may not necessarily lead to "overcrowding", i.e., leaving the private sector to scramble for lesser funds available for credit.
A prudent move, given that interest rates may not increase signficantly and at the same time, keeping inflation in check. Inflation seems to be a primary concern of Central Banks all over the world, most notably the Federal Reserve, and our own Bangko Sentral is no exception.
At under 3%, inflation remains manageable and the GDP growth achieved so far seems to be in no immediate danger of overheating.
The operative word here is "excess". As such, mopping up the extra PhP20 billion circulating in the economy may not necessarily lead to "overcrowding", i.e., leaving the private sector to scramble for lesser funds available for credit.
A prudent move, given that interest rates may not increase signficantly and at the same time, keeping inflation in check. Inflation seems to be a primary concern of Central Banks all over the world, most notably the Federal Reserve, and our own Bangko Sentral is no exception.
At under 3%, inflation remains manageable and the GDP growth achieved so far seems to be in no immediate danger of overheating.
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