In December last year, the currency supply increased by more than 40 trillion won, raising the amount of money circulating in the market to over 4,183 trillion won. The currency supply has been on the rise for 19 consecutive months, attributed to year-end capital flowing into demand deposits and other accounts.

According to the statistics on 'December 2024 currency and liquidity' released by the Bank of Korea on the 13th, the average broad money supply (M2) in December last year was 4,183.5 trillion won, up 1.0% (40.5 trillion won) from the previous month. M2 has been increasing for 19 months since June 2023 (+0.3%).

An employee organizes 50,000 won bills at the Hana Bank Counterfeit Center in Jung-gu, Seoul. /Courtesy of News1

M2 is a broad measure of the money supply, including cash, demand deposits, and savings deposits that allow for immediate withdrawals, as well as money market funds (MMF), fixed-term deposits and savings for less than two years, revenue securities, and repurchase agreements (RP), generally referring to the amount of currency circulating in the market.

By financial product, demand deposits increased by 18.6 trillion won and other currency products by 5.7 trillion won over the month. In contrast, fixed-term deposits decreased by 4.6 trillion won.

According to the Bank of Korea, demand deposits increased due to corporate funds for financial ratio management and investment waiting funds resulting from increased asset market volatility, while other currency products grew as export proceeds flowed in. Conversely, the case of fixed-term deposits decreased due to fiscal execution by local governments.

By economic entity, liquidity increased in households and non-profit organizations (+10.2 trillion won), corporations (+31.5 trillion won), and other financial institutions (+3.9 trillion won).

The average narrow money supply (M1), which includes only cash and demand deposits, showed a seasonally adjusted increase of 2.0% (25.4 trillion won) from the previous month, primarily due to demand deposits. Liquidity in financial institutions (Lf, average) increased by 0.9%, while broad liquidity (L, end-of-month) increased by 0.2%.

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