September Regular Savings and Deposits Increase Second Highest Ever... Money Supply Up by 100 Billion Won+

Demand Deposit Savings Accounts Show Record Largest Decline

[Asia Economy Reporter Seo So-jeong] Amid the impact of the base interest rate hike, the increase in regular savings and time deposits in September reached the second highest ever, while the money supply in September increased by about 100 billion KRW, maintaining the level of August.

According to the 'Money and Liquidity' statistics released by the Bank of Korea on the 15th, the average broad money supply (M2) balance in September was 3,744.2 trillion KRW, increasing by 100 billion KRW from August, maintaining the previous month's level. The M2 money supply growth rate more than doubled from 0.3% in June and July to 0.7% in August.

The broad money supply indicator M2 includes cash, demand deposits, and checking deposits (all M1), as well as money market funds (MMF), time deposits under two years, installment savings, beneficiary certificates, negotiable certificates of deposit (CD), repurchase agreements (RP), financial bonds under two years, and money trusts under two years?short-term financial products that can be quickly converted into cash.

According to the Bank of Korea, following the interest rate hikes, investors have flocked to regular savings and time deposits, sustaining the growth trend of M2. However, the year-on-year growth rate has been declining since December last year (13.2%), with 9.4% in April, 9.3% in May, 8.8% in June, 8.0% in July, 7.2% in August, and 6.6% in September.

Breaking down M2 by financial products, regular savings and time deposits surged by 30.5 trillion KRW compared to the previous month, marking the second largest increase since the statistics were compiled in December 2001. In contrast, savings deposits with checking features and demand deposits decreased by 11.7 trillion KRW and 11 trillion KRW, respectively.

Savings deposits with checking features decreased by 11.1 trillion KRW in August, and the further decline in September marked the largest decrease on record.

By economic agents, corporations (11.5 trillion KRW) and households and non-profit organizations (8.6 trillion KRW) increased mainly in regular savings and time deposits, whereas other financial institutions (-13.7 trillion KRW) decreased mainly in money trusts and money market funds (MMF).

Meanwhile, M1 (narrow money), an indicator of short-term funds, decreased by 22.4 trillion KRW (1.7%) compared to the previous month due to a decline in transaction deposits. This marks the third consecutive month of decline with -1.0% in July and -1.5% in August. The year-on-year growth rate was -0.4%, showing the first decrease since April 2008 (-2.3%).

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