M2 index inches up as money supply improves

Korea’s money supply rose 0.7 percent in February from the previous month due to growth in short-term savings at banks, the central bank said yesterday.

The country’s M2, a narrow measure of the money supply, reached a seasonally-adjusted 1,768.3 trillion won ($1.55 trillion) in February, compared with 1,756.1 trillion won in the previous month, according to the Bank of Korea (BOK). Compared with a year earlier, the M2 also expanded 5.3 percent in the month.

Since January, the central bank began releasing seasonally-adjusted figures on money supply data using on-month comparisons in order to better gauge short-term economic situations.

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 held by insurers and brokerage houses.

“Gains in short-term deposits and money market funds drove up the rise,” the BOK said in a statement. “Deposits, with maturity of less than two years, made by businesses and individuals increased in the cited month.”

Liquidity provided by financial institutions rose 0.9 percent in February from a month earlier to 2,309.7 trillion won, and gained 7.2 percent on-year.

Growth of Korea’s liquidity aggregate, the broadest measure of the money supply, edged up 0.3 percent on-month in the second month of this year to 3,006.1 trillion won, the central bank said. The liquidity aggregate covers currency in circulation and all types of deposits at financial institutions and state and corporate bonds.

The data was released one day ahead of the BOK monetary policy meeting. The central bank is widely expected to leave the key interest rate unchanged at 3.25 percent for the 10th straight month. Yonhap