Money supply gallops on frontloading

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Money supply gallops on frontloading

Korea’s money supply grew at its steepest clip in 18 months in July on the government’s frontloading of fiscal spending and bank lending, the central bank said yesterday.

Korea’s M2, a narrow measure of the money supply, amounted to 1,805.9 trillion won ($1.6 trillion) in July, up 6 percent from a year earlier, according to the Bank of Korea.

The July growth quickened from a 5.9 percent on-year expansion in June and also marked the fastest gain since January 2011, when the M2 grew 6.5 percent on-year.

On a seasonally adjusted basis, the country’s M2 grew 0.9 percent in July from the previous month, also picking up from a 0.4 percent on-month gain in June.

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

The growth of the nation’s money supply accelerated after M2 growth hit a seven-year low of 3 percent in June 2011, it added.

The BOK said in a separate statement that the growth of Korea’s M2 is estimated to have slowed to the upper range of 5 percent in August as bank lending grew at a slower pace from a year earlier.

The liquidity aggregate, the broadest measure of the money supply, grew 9 percent in July from the previous year, slowing from a 9.6 percent on-year gain in June, it added.

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

The data came one day before BOK policy makers are to hold their monthly rate-setting meeting. Analysts said the BOK is likely to cut the key rate by a quarter percentage point to 2.75 percent to prop up weakening growth.

The central bank froze the key rate at 3 percent last month after making a surprise cut in July in a bid to cushion the impact of the euro zone debt crisis on the local economy.

Yonhap

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