Growth of money supply inches up

The growth of money supply inched up in July as bank lending remained firm and the current account surplus widened, the central bank said yesterday.

The country’s M2, a measure of money supply, reached 1,705.5 trillion won ($1.6 trillion) in July, up 3.2 percent from a year earlier, according to the Bank of Korea.

The July reading rose slightly from a seven-year low of 3 percent expansion tallied in June, the BOK said.

The M2 covers currency in circulation and all types of deposits with a maturity of less than two years at lenders and nonbanking financial institutions, excluding those at insurers and brokerage houses.

“It is too early to say that the growth of the M2 returned to the upward trend. But in August, bank lending remained robust amid foreign stock and bond fund inflows,” said an official at the BOK.

The on-year growth in the M2 had been slowing for the 11th straight month since July of last year when the money supply expanded 9.3 percent from the previous year, as banks were wary of extending loans despite ample liquidity driven by low interest rates.

The BOK said in a separate statement that the country’s M2 is estimated to have grown at the upper-3 percent range in August as an increase in bank lending overshadowed foreign capital outflows.

Liquidity provided by financial institutions grew 4.6 percent on-year to 2,208.6 trillion won in July, picking up from a record low of 4.1 percent expansion in June, the BOK said.

The country’s liquidity aggregate, the broadest measure of the money supply, grew 9 percent in July, accelerating from a 8.1 percent on-year gain in June.

The liquidity aggregate covers currency in circulation, all types of deposits at financial institutions and state and corporate bonds.

The data came one day before the BOK holds its monthly rate-review meeting. Analysts forecast that the BOK is likely to freeze the key interest rate at 3.25 percent for the third consecutive month on increased external economic uncertainty.

Yonhap