In April, the currency supply (M2) increased by more than 8 trillion won, marking a transition to growth after a month. This was influenced by the influx of funds into time deposits, savings accounts, and revenue securities ahead of interest rate cuts.
According to the Bank of Korea's announcement on the 'currency and liquidity' on the 16th, M2 (broad money, average balance) for April this year was recorded at 4,235.8 trillion won, an increase of 8.1 trillion won (0.2%) compared to the previous month. M2 had been increasing for 22 consecutive months starting in May 2023 before declining in March, and it turned to growth again after one month. The year-on-year growth rate decreased from 6.1% to 3.5%.
M2 is a broad measure of currency that includes cash, demand deposits, and savings deposits, as well as money market funds (MMFs), time deposits with maturities of less than 2 years, revenue securities, and repurchase agreements (RPs). It typically refers to the currency supply in the market.
By financial products, time deposits (+9.4 trillion won) saw an increase due to rising deposit demand in anticipation of additional interest rate cuts, while revenue securities (+5.1 trillion won), which offer higher yields compared to deposits, attracted funds, thereby increasing liquidity.
In contrast, savings deposits with no fixed terms (-5.3 trillion won) decreased due to fiscal execution by local governments. Other currency-like products (-3.9 trillion won) saw a decline mainly in foreign currency deposits due to import payment settlements and net repayments of borrowing funds.
By economic agents, households and non-profit organizations increased deposits centered around time deposits by 300 billion won, while corporations increased by 6.4 trillion won, primarily in revenue securities and MMFs. Meanwhile, other financial institutions decreased by 6.7 trillion won, focusing on other currency products.
The average balance of narrow money (M1) decreased by 7 trillion won (0.6%) compared to the previous month, totaling 1,272.5 trillion won. The year-on-year growth rate slightly increased from 3.4% to 3.5%. Liquidity in financial institutions was recorded at 5,785.7 trillion won, while broad liquidity was at 7,276.9 trillion won, increasing by 0.3% and 0.5% respectively compared to the previous month.