Liquidity in July Up by 25.6 Trillion Won Compared to Previous Month... Concentrated in Bank Deposits and Savings

Market Money Supply Increases for Second Consecutive Month

In July, monetary liquidity increased by 25.6 trillion won, marking a rise for two consecutive months.

According to the 'July Money and Liquidity' report released by the Bank of Korea on the 13th, the broad money supply (M2, seasonally adjusted series, average balance) in July was 3,820.6 trillion won, up 25.6 trillion won or 0.7% from the previous month. This increase was larger than the 0.3% growth in June. M2 includes narrow money (M1), which consists of cash, demand deposits, and checking deposits, as well as money market funds (MMF), time deposits and savings deposits under two years, and securities that can be converted into cash at any time.

M2, which had decreased in January this year, rebounded by 0.3% in February, then declined by 0.2% in March, marking the first time since July-September 1999 that it showed a three-month consecutive decline. The upward trend that resumed in June continued into July. Compared to the same month last year, the slowdown in growth that had persisted since December 2021 (13.2%) appears to have paused.

By product, time deposits increased by 11.8 trillion won influenced by banks raising the one-year fixed deposit interest rates. Demand deposits and checking savings deposits rose by 8.4 trillion won due to inflows of settlement funds for value-added tax and property tax payments. On the other hand, financial bonds decreased by 7.4 trillion won as bank bonds were net repaid, and money trusts declined by 1.4 trillion won mainly due to corporate bank trusts.

By economic agents, households and non-profit organizations increased by 13 trillion won mainly in demand deposits, and corporations increased by 9.9 trillion won mainly in time deposits and savings deposits, while other financial institutions slightly decreased by about 800 billion won.

M1, which refers to ‘cash’ that can be used immediately, stood at 1,188.9 trillion won in July, increasing by 13.2 trillion won from the previous month as both demand deposits and checking savings deposits rose. This marked a turnaround to growth after 13 consecutive months of decline, the longest period on record since June last year.

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