October Market Money Supply Increased by 35 Trillion to 3,150.5 Trillion... Second Largest Increase Ever
[Asia Economy Reporter Kim Eun-byeol] Amid the ongoing expansion of liquidity following the COVID-19 pandemic, the money supply in circulation increased again in October. As economic agents steadily secured funds through loans and other means, the money supply in circulation swelled to the second-largest scale on record.
According to the Bank of Korea's report 'Money and Liquidity in October 2020,' the broad money supply (M2, seasonally adjusted, average balance basis), which represents the money supply in circulation, reached 3,150.5 trillion KRW in October, up 34.7 trillion KRW (1.1%) from the previous month (3,115.8 trillion KRW). Compared to the same month last year, it increased by 9.7%.
M2 is a broad monetary indicator that includes cash, demand deposits, savings deposits with flexible withdrawal, and money market funds (MMFs), representing liquid funds that can be converted into cash at any time. The increase in October was the second-largest since the related statistics began in 1986, following May of this year (35.4 trillion KRW). Previously, in April, it increased by 34 trillion KRW.
By financial product, savings deposits increased by 9.6 trillion KRW, and demand deposits rose by 7 trillion KRW. Money trusts under two years increased by 6.2 trillion KRW, and beneficiary certificates rose by 4.9 trillion KRW.
By economic agent, households and non-profit organizations increased by 18.5 trillion KRW, corporations by 10.7 trillion KRW, other financial institutions by 9.8 trillion KRW, and other sectors by 1.7 trillion KRW, all showing growth.
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The increase in households and non-profit organizations was the largest in 14 years and 4 months since June 2006 (21.1 trillion KRW). The Bank of Korea explained that this was mainly due to an increase in savings deposits with flexible withdrawal, driven by the inflow of Chuseok bonuses at the end of September.
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