Domestic Money Supply Shows Increase for 8 Consecutive Months

Bank of Korea 'January Money and Liquidity'
Weakened Expectations for US Interest Rate Cuts
Increase Mainly in Money Trusts and MMFs

With weakened expectations for an early interest rate cut in the United States, short-term liquidity has become abundant, leading to an increase in the money supply for the eighth consecutive month. However, the growth rate slowed to 0.2% compared to the previous month.

According to the "January 2024 Money and Liquidity" report released by the Bank of Korea on the 15th, the broad money supply (M2, seasonally adjusted, average balance basis) in January reached 3,920.9 trillion won, an increase of 6.6 trillion won from the previous month. The growth rate was 0.2%, down from 0.6% in the previous month. The money supply has been rising for eight consecutive months since a 0.4% increase in June last year.

M2 is an indicator used to represent the amount of money circulating in the market. It includes narrow money (M1), which consists of cash, demand deposits, and savings deposits with check-writing privileges, as well as financial products such as money market funds (MMF), time deposits and savings deposits under two years, beneficiary certificates, negotiable certificates of deposit (CD), and repurchase agreements (RP).

Looking at the breakdown by product, money trusts (6.4 trillion won) and MMFs (5.5 trillion won) increased, while market-type products (-5.4 trillion won), time deposits (-4 trillion won), and savings deposits with check-writing privileges (-3.1 trillion won) decreased.

Money trusts increased due to net issuance of asset-backed commercial paper (ABCP) from time deposits and short-term operational demand for subscription deposits of public offering stocks, while MMFs rose as short-term standby funds flowed in. Market-type products and time deposits declined due to falling deposit interest rates, and savings deposits with check-writing privileges decreased due to corporate fund outflows.

Lee Ji-seon, head of the Financial Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Until December last year, there were strong expectations that the U.S. Federal Reserve (Fed) would cut interest rates early, but in January this year, those expectations weakened, leading to an increase in short-term standby funds from those unable to find investment destinations. These funds flowed significantly into MMFs and demand deposits."

By economic agent, the money supply increased across all sectors. Other financial institutions (8.7 trillion won) grew mainly through MMFs and money trusts, corporations (2.2 trillion won) increased mainly through MMFs and demand deposits, other sectors (2.1 trillion won) rose centered on MMFs, and households and nonprofit organizations (0.5 trillion won) increased mainly through time deposits and savings deposits.

Meanwhile, M1 (seasonally adjusted, average balance basis) stood at 1,220.9 trillion won, up 3.1 trillion won from the previous month. The growth rate was 0.3%, down from 1.6% in the previous month.

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