The Bangko Sentral ng Pilipinas (BSP) has successfully absorbed P1.809 trillion of excess liquidity from the financial system as of the end of October, primarily through the employment of BSP bills, which accounted for the majority of the funds.
The central bank’s initiative to mop up surplus liquidity serves the dual purpose of controlling inflation and actively managing liquidity within the market.
Essentially, this involves withdrawing money from banks and redirecting these funds into the BSP’s interest-earning monetary operations, aiming to influence the demand and supply dynamics for central bank money.
During this period, the BSP securities facility, a weekly auction featuring two tenors, absorbed 40.6 percent or approximately P734.8 billion of the total P1.809 trillion. Simultaneously, placements in the term deposit facility (TDF), conducted every Wednesday with two tenors, accounted for P458 billion, constituting 25.3 percent of the total liquidity absorption.
Daily instruments such as the overnight reverse repurchase (ON RRP) facility and the overnight deposit facility played a role in liquidity management. The ON RRP facility absorbed P444.7 billion (24.6 percent), while the deposit facilities absorbed 9.5 percent or P172 billion.
BSP Deputy Governor Francisco G. Dakila Jr. asserted that the central bank possesses ample tools to effectively control inflation, manage liquidity, and guide market rates closer to the BSP rate.
As of the end of October, the inflation rate remained elevated at a year-to-date average of 6.4 percent, exceeding the targeted range of two percent to four percent for the year until 2025. T
he BSP forecasts a six percent baseline consumer price index (CPI) and a 6.1 percent risk-adjusted estimate for the year.
