Synopsis
In January, South Korea's money supply saw a significant increase for the 20th month, driven by short-term funds amidst market volatility and declining interest rates, according to the Bank of Korea.Key Takeaways
- South Korea's money supply increased for 20 months.
- M2 reached 4,203.8 trillion won in January.
- Year-over-year, the money supply grew by 7.5 percent.
- Investment funds surged due to low deposit rates.
- Household loan growth remains manageable.
Seoul, March 17 (NationPress) In January, South Korea's money supply increased for the 20th month in a row, primarily driven by a rise in short-term funds during periods of market volatility and declining deposit interest rates, as reported by the central bank on Monday.
The M2, a significant indicator of the money supply, reached 4,203.8 trillion won (approximately US$2.89 trillion) in January, reflecting a 0.5 percent increase compared to the previous month, according to preliminary data from the Bank of Korea (BOK).
Since June 2023, the money supply has shown a continuous upward trend, as per Yonhap news agency.
Year-over-year, the money supply rose by 7.5 percent in January, marking the highest annual growth since August 2022.
The M2 measure includes cash, demand deposits, and other financial instruments that can be easily converted.
This increase was fueled by a rise in demand deposits, which grew by 5.5 trillion won amidst significant volatility in the asset market. The recent decline in deposit interest rates also contributed to the investment fund growth.
Investment in securities added 5.3 trillion won, while inflows into trust and money market funds (MMFs) increased by 4.7 trillion won and 4.5 trillion won, respectively.
Additionally, funds held by businesses surged by 21.2 trillion won, with an increase of 3.9 trillion won for households and nonprofit organizations in January.
South Korea's total liquidity aggregate, the broadest measure of the money supply, rose by 0.8 percent month-on-month to reach 7,175.3 trillion won, according to the data.
On another note, the financial regulator mentioned on Monday that the growth of household loans remains manageable, despite a spike last month coinciding with the spring moving season and rising home prices in certain Seoul areas.
In February, household loans issued by all financial institutions increased by 4.3 trillion won from the previous month, totaling 1,667 trillion won, reversing the decline observed the month before.
Notably, household loans from banks increased for the first time in three months in February.
The Financial Services Commission (FSC) stated, "Household loan growth picked up in February, but it remains within manageable limits."
However, there are indications that home prices are beginning to rise due to monetary easing, banks relaxing some lending regulations, and the government lifting certain land transaction restrictions in Seoul.
Last week, the Bank of Korea cautioned that these conditions could heighten expectations for further increases in housing prices, potentially leading to a rise in household debt.
