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.