In February this year, liquidity in the market increased by about 600 billion won, the smallest rise in four months. Funds temporarily swelled in circulation as fiscal execution by local governments was delayed during the Lunar New Year holiday, but the increase was limited as the household withdrew a large amount of time deposits to invest in stocks.
According to the "currency and liquidity" data released by the Bank of Korea on the 15th, broad money (M2, average balance basis) totaled 4,114 trillion won, up 600 billion won (0.0%) from a month earlier. It was the first time in four months that M2 stopped expanding since October last year (0.0%). The M2 growth rate widened from 0.1% in November to 0.5% in December and 0.7% in January this year.
By financial product, savings deposits withdrawable on demand increased by 4.5 trillion won. Typically in February, May, August, and November, the government allocates local income tax to local governments, and it is seen that fiscal execution by local governments was temporarily suspended over the Lunar New Year holiday, tying up funds in the form of demand deposits.
By contrast, market-type products fell by 3.7 trillion won. Prolonged freezes in the benchmark rate worsened issuance conditions. According to the Korea Financial Investment Association, the certificate of deposit (CD) rate (91–180 days), one of the market-type products, rose from 2.94% at the end of January to 3.83% at the end of February. That means the interest banks must pay to investors who purchased this product increased.
By economic agent, liquidity at nonfinancial corporations increased by 5 trillion won, and other financial institutions by 9.4 trillion won. The other institutional sector also rose by 1.3 trillion won. In contrast, households and nonprofit organizations plunged by 10.5 trillion won. The Bank of Korea (BOK) said this was because the household reduced time deposits and increased investment deposits as stock investment grew.
On the previous basis including revenue securities, M2 totaled 4,599 trillion won, up 0.8% from a month earlier. Compared with a year ago, it rose 9.1%. In line with International Monetary Fund (IMF) recommendations, the Bank of Korea (BOK) has excluded highly volatile revenue securities from the M2 indicator since October last year.