BSP Gov. Nestor Espenilla INQUIRER file photo
Banks on Wednesday jostled to deposit excess cash into the liquidity management facility of the Bangko Sentral ng Pilipinas (BSP), printing regulators to declare that their scheme aimed at capping inflation was working.
In a message to reporters, BSP Gov. Nestor Espenilla Jr. said the latest auction for the central bank’s term deposit facility – where banks are paid yields for depositing idle funds over the short term, thus removing them temporarily from inflationary circulation – was met with strong demand from financial institutions.
He had earlier stressed that the central bank’s recent decision to cut banks’ reserve requirements by one percentage point would not result in higher inflation because the P90 billion that the move would release would be mopped up by the increased volumes in the term deposit window.
“The auction results today confirm success and effectiveness of our operational adjustment,” Espenilla said, repeating his earlier assertion that the reserve requirement cut was not a monetary easing move, but a structural adjustment meant to reform outdated policies in the banking sector.
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“Strong participation resulting in over-subscription across all tenors,” he said. “Resulting yields trace a pattern consistent with healthy price discovery in line with macro fundamentals.”
BSP said that banks tendered P80 billion for the P50 billion on offer for the seven-day window, with the rate averaging 3.1767 percent. This was higher than the previous week’s 3.0685 percent.
