Bank of Korea July ‌2024 Currency and Liquidity Announcement

M2 Reaches 4,053.9 Trillion, Increasing for 14 Consecutive Months

According to the​ ‘July 2024 Currency‌ and⁢ Liquidity’ released by⁤ the ‌Bank of Korea, broad money⁢ (M2,​ seasonally adjusted series,‌ average ⁤balance) ⁤in⁣ July was 4,053.9 trillion won, an increase of 16.3 trillion won from ⁢the previous month.

M2 is a broad indicator used primarily to express the ⁤amount of​ money released into the market. It includes narrow money (M1) such as ‌cash, demand deposits, and time deposits, as ⁤well as money market funds (MMF), time deposits and savings deposits with maturities of less than ⁢two years, income securities, certificates of deposit (CDs), and repurchase agreements (RPs).

M2 showed a three-month consecutive decline from March to May ⁤last year for ⁣the first time ⁢in 24 years since 1999. After that, ​it rebounded from June of last year and has been‍ on an upward trend for 14 ‌consecutive months as of July of this​ year.

The year-on-year increase rate⁤ of⁣ M2 in​ July was 6.2%, exceeding the previous month’s increase (6.1%). By financial product,⁣ income securities increased by 10.8 trillion won and other monetary products increased by 5.8 trillion won. Time deposits and savings also increased by 5.3 trillion won.

A ⁤Bank of Korea official explained, “Due to factors such as heightened expectations of a rate cut by the U.S.‌ Federal Reserve, yield securities increased⁢ significantly, centering⁤ on short-term bond funds, while other monetary ‌products increased due to⁣ the inflow of funds into foreign currency deposits and CMAs.”

Households and non-profit organizations had the largest increase, with an increase of KRW 18.9 trillion​ centered on time deposits and savings, while other financial institutions had an increase of KRW 4.3 trillion centered on income securities. Companies⁤ had an increase of KRW 3.6 trillion centered‍ on ⁢time ‍deposits, savings, and⁣ income securities.

As savings‌ deposits and demand​ deposits decreased, M1 (KRW 1,216.6 trillion), an indicator of short-term funds, decreased by KRW 4 trillion from the previous month. This is ⁤a 0.3% decrease compared to the previous⁤ month, ⁣and ⁤a 2.5% increase compared to the same month last year.

Financial institution liquidity increased by ⁣9.8 trillion won compared to ‌the previous month, and broad liquidity decreased by 1.8 trillion won compared⁣ to the end of the previous month.