Money supply continues to grow rapidly
The money supply was also affected by some initial public offerings that were oversubscribed recently.
According to the central bank, M2 in March increased by 11 percent year on year to reach 3,313.1 trillion won ($2.9 trillion). It was the largest monthly on-year growth in 12 years since 11.1 percent growth in March 2009.
On month, M2 increased by 1.2 percent.
M2 is a measure of the money supply that includes all elements of M1 as well as "near money" such as saving deposits, money market securities and mutual funds that are easily cashable. M1 refers to cash and checking deposits.
Money supply to households, companies and financial institutions all increased.
In March, M2 of households and non-profit organizations increased by 7.2 percent on-year to 1,638.5 trillion won largely due to an increase in mortgage loans.
Companies' M2 increased by 18.4 percent on-year to 973.6 trillion won as companies, especially small and midsized enterprises, borrowed to brace for the impact of the coronavirus pandemic. A lot of money also poured into companies as support funds from state-run financial institutions.
M2 of non-bank financial institutions including brokerages and insurance companies grew by 15.5 percent on-year to 526.6 trillion won.
The growth was driven largely by funds that flowed into brokerages as investors oversubscribed to an SK Bioscience initial public offering in March.
The country's M2 increased at double digit rates on-year during the first three months of this year, igniting worries of inflation. In January, M2 grew by 10.1 percent and in February by 10.7 percent compared to the previous year.
The central bank, however, has maintained that it will not raise interest rates despite some inflationary forces in the market during a monetary policy board meeting held last month.
The central bank has maintained the country's key interest rate at a record low rate of 0.5 percent since last May.
BY KIM JEE-HEE [email@example.com]