SOME P1.5 trillion in excess money supply had been mopped up as of Nov. 19 last year, the Bangko Sentral ng Pilipinas (BSP) reported.
Excess money supply, or excess liquidity, means the total amount of money in the financial system exceeds what is necessary to support current economic growth and transactions at a stable price level. It leads to increased spending demand that pushes prices up, causing inflation.
Absorbing excess liquidity was done through term instruments, with BSP’s securities facilities taking the largest share at 42.4 percent of total placements. The remainder was siphoned through overnight reverse repurchase at 34.6 percent, overnight deposit at 17.6 percent, and term deposit at 5.4 percent.
Term instruments play a crucial role in managing excess money in the system, ensuring that inflationary pressures are contained while supporting overall financial stability.
Interest rates on term deposits and BSP securities had fully reflected the cumulative 175-basis-point policy rate cuts since August 2024.
On Nov. 3, the BSP moved to a single-tenor offering for its term facilities to streamline liquidity instruments and focus on maturity dates that better support monetary policy transmission, while retaining the seven-day term deposit facility and the 28-day BSP bill.
“The BSP’s monetary operations effectively kept the overnight reverse repurchase rate aligned with the target reverse repurchase rate,” the BSP said.
The central bank’s policymaking Monetary Board had cut key interest rates by 200 basis points since August last year as an inflation surge ended, the last being a 25-basis point reduction in December.
In its December report, the BSP said the Board “views the current monetary policy easing cycle as nearing its end.”
Persistent below-target GDP growth could give room to deliver two rate cuts this year, BSP Governor Eli Remolona Jr. said.