Demand for money increased further in June 2006 as domestic liquidity or M3 rose by 13.4 percent year-on-year, based on preliminary data from the BSP’s Depository Corporations Survey (DCS). This was a further acceleration from the 12.7 percent growth recorded in May. On a month-on-month basis, M3 rose by 2.1 percent.
The continued growth in domestic liquidity can be attributed to the increase in net foreign assets and credits to the public sector. The build-up in the BSP’s net international reserves—resulting mainly from the accumulation in foreign assets—and the reduction in deposit money banks’ (DMBs) foreign liabilities drove the increase in net foreign assets. Contributing to this was the sustained growth in overseas Filipino workers’ remittances and portfolio investments. Meanwhile, the growth in credits to the public sector was driven by increased credit to the National Government in the form of investments, and increased lending to local government units and semi-government entities.
Going forward, the Monetary Board will continue to closely monitor the evolving conditions for consumer prices and aggregate demand in order to determine the appropriate stance of monetary policy. Particular attention will be given to ensuring that the level of liquidity is consistent with the BSP’s price stability objective.
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