In November last year, the money supply reached 4,143 trillion won. The currency supply has been increasing for 18 months, leading to greater liquidity in the market. This is interpreted as a result of growing standby funds due to poor domestic stock market performance.
The Bank of Korea noted on the 14th through its report on ‘currency and liquidity for November 2024’ that the M2 (broad money) recorded an increase of 32.3 trillion won compared to the previous month, reaching a total of 4,143 trillion won in November last year. The month-on-month growth rate was 0.8%, which represents a decline from the increase of 1.0% in October.
However, the liquidity in the market has been increasing for one and a half years. M2 began to rebound from June 2023 (+0.3%) and has continued to rise for 18 months. The year-on-year growth rate was 6.4%, maintaining an upward trend after the previous month’s growth of (+6.5%). A Bank of Korea official explained, “Since the second half of last year, the currency supply has shown a moderate increase.”
M2 broadly refers to the currency supply in circulation and includes cash, demand deposits, and time deposits, as well as money market funds (MMF), time deposits and savings with a maturity of less than two years, revenue securities, and repurchase agreements (RP).
By financial product, demand deposits increased by 11.4 trillion won compared to the previous month (+4 trillion won). This is due to increased standby funds influenced by the volatility in the asset market. Some banks have expanded their parking savings account products, which offer free deposits and withdrawals along with high-interest rates, to attract standby funds.
The issuance of financial securities with maturities of less than two years expanded from an increase of 3.4 trillion won the previous month to 5.5 trillion won. This improvement is attributed to better issuance conditions due to declining market interest rates. In contrast, market-type securities shifted from an increase of 9 trillion won the previous month to a decrease of 2.7 trillion won.
By entity, households and non-profit organizations increased their demand deposits and time savings by 10.6 trillion won. Corporations expanded their time savings and MMF by 5.3 trillion won.
Narrow money (M1) averaged 1,248.9 trillion won, marking an increase of 15.4 trillion won (1.2%) compared to the previous month. When compared to the same month last year, it increased by 4.1%.
Liquidity in financial institutions (Lf) increased by 0.8% to 5,646.9 trillion won. Broad liquidity rose by 0.7% from the end of the previous month. Compared to the same month last year, it increased by 5.6%.