Money supply expanded at a faster pace in March, driven by increased borrowings from households and non-financial corporations, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

The central bank said domestic liquidity (M3)—a broad measure of money supply that includes currency in circulation, bank deposits, and other financial assets that are easily convertible to cash—grew by 12.0 percent year on year to P20.4 trillion in March 2026, faster than the 10.3-percent increase recorded in the previous month, based on preliminary BSP data.

After adjusting for seasonal fluctuations, the BSP said M3 increased by 1.7 percent month on month in March.

The March outturn marked a pickup from earlier trends. In previous months, liquidity growth had slowed—falling to as low as 7.6 percent in late 2025—even as lending remained firm. The relatively softer M3 growth had factored into the central bank’s decision to cut policy rates in December and February.

The BSP treats M3 as one of several indicators influencing inflation and monetary policy. While the relationship is not one-to-one, inflationary pressure generally rises if M3 grows faster than real gross domestic product (GDP), since more money chases roughly the same amount of goods and services.

While the oil shock resulting from the Middle East conflict remained the main driver of headline inflation accelerating to 4.1 percent in March, the gap between demand-side pressures such as M3 growth and real GDP growth—which slowed to 2.8 percent in the first quarter—suggests some inflationary impact, albeit not to the extent caused by the national energy emergency.

This likely also played a role in the BSP’s decision to hike interest rates by 25 basis points at the end of April, with inflation surging further to 7.2 percent—the second straight month headline inflation exceeded the central bank’s target range amid the energy crisis.

Claims on the private sector alone, which mainly cover borrowings by non-financial private corporations and households, grew by 11.8 percent in March from 10.6 percent in February. Meanwhile, net claims on the central government increased by 12.1 percent in March, driven mainly by higher government securities (GS) issuances.

Net foreign assets (NFAs)—which represent the difference between claims on nonresidents and liabilities to nonresidents of depository corporations—in peso terms rose by 8.6 percent year on year in March from the revised 7.5 percent growth in February.

The BSP’s NFA position expanded by 4.9 percent. Similarly, banks’ NFA position grew, primarily due to lower foreign currency-denominated bills.