Market Money Supply Up 7.9%... Highest Growth Rate in 4 Years

[Asia Economy Reporter Eunbyeol Kim] The money supply in the market is showing an increasingly steep upward trend. The speed at which money is flowing into the market is accelerating due to the base interest rate cut.

According to the "Monetary and Liquidity Trends for December 2019" released by the Bank of Korea on the 14th, the broad money supply (M2, based on the average balance in Korean won) stood at 2,912.4341 trillion won, marking a 7.9% increase compared to the same month last year. This represents a high growth rate in the 7% range for four consecutive months since September last year (7.6%). The increase has also been growing each month, with the December growth rate recording the highest level since February 2016 (8.3%).

M2 is a broad monetary indicator that includes cash, demand deposits, savings deposits with flexible withdrawal, money market funds (MMF), and time deposits and savings deposits with maturities under two years.

By financial product, increases were centered on savings deposits with flexible withdrawal (12.5 trillion won) and demand deposits (5.9 trillion won). The government's year-end fiscal spending, which injected funds into companies, influenced this trend. By sector, increases were mainly seen in corporations (13.2 trillion won), households, and non-profit organizations (10.6 trillion won).

The annual M2 for 2019 (based on the average balance in Korean won) also rose by 7.0% compared to 2018, reaching 2,809.9437 trillion won.

The short-term immobilization phenomenon, where market funds concentrate in short-term financial products, also continued. The short-term money supply indicator M1 (narrow money) was 922.3 trillion won in December (seasonally adjusted series, average balance basis), showing a 2.2% increase from the previous month. The annual M1 for 2019 was 876.9 trillion won, up 4.3% compared to the previous year.

This content was produced with the assistance of AI translation services.