Money supply growth slows; bank lending holds – BSP

The Philippines’ money supply declined while bank lending remained steady in November 2025, according to the latest data from the Bangko Sentral ng Pilipinas (BSP).

In two separate advisories, the central bank said the growth rate of domestic liquidity (M3) slowed to 7.6 percent year on year, the weakest pace since August 2025, bringing total money supply to P19.4 trillion. Meanwhile, outstanding loans of universal and commercial banks (U/KBs) expanded by 10.3 percent year on year, a rate largely unchanged from the previous month.

The BSP said loans used to fund business activities grew by 9.0 percent in November. Lending rose across several industries, led by air-conditioning supply (26.6 percent), repair of motor vehicles and motorcycles (11.6 percent), and transportation and storage (12.7 percent).

Consumer loans to residents — including credit card, motor vehicle, and general-purpose salary loans — eased slightly to 22.9 percent in November from 23.1 percent in October.

M3 is a broad measure of money supply that includes currency in circulation, bank deposits, and other financial assets that can be readily converted into cash. Money supply and bank lending have a reinforcing relationship: higher M3 increases deposits and reserves in the banking system, easing funding constraints and allowing banks to expand credit.

When banks issue loans, they create deposits, which in turn raise the money supply and boost domestic liquidity. Lending also finances consumption — which accounts for a large share of Philippine gross domestic product (GDP) — as well as investment. Stronger economic activity supports income growth and savings, further reinforcing liquidity.

The BSP closely monitors M3 and bank lending as key inputs in monetary policy decisions. The moderation in money supply growth, alongside steady lending, likely influenced the Monetary Board’s decision in December to cut the target reverse repurchase (RRP) rate, the central bank’s primary tool for managing interest rates and liquidity.

By adjusting the RRP, the BSP affects borrowing costs, liquidity conditions, and overall economic activity. A lower RRP reduces borrowing costs, encouraging investment and consumer spending — critical drivers in a consumption-led economy.

BSP Governor Eli M. Remolona Jr. has said another RRP cut at the Monetary Board’s 19 February meeting remains “on the table,” while clarifying that such a move is “unlikely.”