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July Currency Volume Reaches 4,053.9 Trillion Won, Marking 14th Consecutive Month of Increase
Bank of Korea Announces July 2024 Currency and Liquidity Report
Trends in currency and liquidity indicators.
The money supply has increased for the 14th consecutive month, driven by investments in yield-generating securities in anticipation of a U.S. interest rate cut.
According to the Bank of Korea’s ’Money and Liquidity’ report, the average broad money (M2) balance in July was 4,053.9 trillion won, an increase of 16.3 trillion won from June. This marks the 14th consecutive month of growth since June last year.
M2 encompasses narrow money (M1), including 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). It is primarily used to express the amount of money released into the market.
By financial product, there was a notable increase in income securities (+KRW 10.8 trillion), other monetary products (+KRW 5.8 trillion), and time deposits and savings (+KRW 5.3 trillion). Conversely, savings deposits with anytime deposits (-KRW 5.9 trillion) and financial bonds (-KRW 3 trillion) experienced a decline.
A Bank of Korea official attributed the growth to heightened expectations of a rate cut by the U.S. Federal Reserve, leading to a significant increase in yield securities, particularly short-term bond funds.
The official further explained that other monetary products increased as funds flowed into foreign currency deposits and asset management accounts (CMAs), while time deposits and savings grew due to the recognition of high interest rates and banks’ efforts to attract funds.
The Bank of Korea analyzed that savings deposits with regular deposits decreased, primarily among local governments, and financial bonds declined due to net redemption of monetary stabilization bonds and bank bonds.
By sector, households and non-profit organizations (+KRW 18.9 trillion), other financial institutions (+KRW 4.3 trillion), and corporations (+KRW 3.6 trillion) experienced growth, while other sectors (-KRW 2.3 trillion) declined.
The average balance of M1 was 1,216.6 trillion won, a decrease of 4 trillion won from the previous month, mainly due to savings deposits that can be deposited or withdrawn at any time.