Following a recommendation by the International Monetary Fund (IMF), the broadly defined money supply (M2) newly tallied on a basis excluding beneficiary certificates increased 4.8% in November last year from a year earlier. Under the previous standard that included beneficiary certificates, it rose 8.4%.
The Bank of Korea (BOK) had released M2 up to the September data last year based on currency including beneficiary certificates. However, as the IMF recommended excluding beneficiary certificates from M2 due to their high price volatility, since October it has released a new indicator excluding beneficiary certificates.
According to "currency and liquidity for November" released by the Bank of Korea (BOK) on the 14th, M2 (average balance, seasonally adjusted) stood at 4,057.5 trillion won in November last year. It rose 4.8% from a year earlier and 0.1% from a month earlier.
The M2 growth rate year over year widened continuously after increasing by 0.3 percentage point (p) in April last year (3.2%), then narrowed by 0.3 percentage point in October last year (5.2%). In November last year, it narrowed by another 0.4 percentage point, marking a smaller increase for the second straight month.
M2 is a broad currency indicator that adds items such as MMFs (money market funds), time deposits and installment savings with maturities of less than two years, and repurchase agreements (RPs) to narrow money (M1), which includes cash, demand deposits, and passbook savings that allow free withdrawals. It generally refers to the amount of currency circulating in the market.
A Bank of Korea (BOK) official said, "As banks increased funding to manage their liquidity coverage ratio (LCR), M2 grew mainly in financial bonds with maturities under two years and market-type products."
M2 calculated under the past method that included beneficiary certificates (former M2) continued to show strong gains. As of November last year, it was 4,498.6 trillion won, up 8.4% from a year earlier. From August last year (8.1%), the 8% range of growth continued for four straight months.
In this regard, the Bank of Korea (BOK) said former M2 increased as investment in beneficiary certificates rose 38.4% from a year earlier. Beneficiary certificates accounted for 3.4 percentage points of the former M2 growth rate of 8.4%.
Meanwhile, the average balance of narrow money (M1) was 1,332.4 trillion won, up 6.9% from a year earlier. The increase narrowed from the previous month (+7.8%). Financial institution liquidity was 6,024.2 trillion won, up 6.9% over the same period. Broad liquidity was 7,627.8 trillion won, up 6.8%.