Increase in Regular Savings and Time Deposits During Interest Rate Rise... Money Supply Up by 12 Trillion Won in June Compared to Previous Month

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Amid rising interest rates, household regular savings and time deposits have increased, causing the money supply in circulation to grow by nearly 12 trillion won in one month.

According to the June Money and Liquidity report released by the Bank of Korea on the 11th, the broad money supply (M2, seasonally adjusted, average balance) this month was 3,709.3 trillion won, an increase of 0.3% (12 trillion won) compared to the previous month. Compared to one year ago, it increased by 8.8%.

The broad money supply indicator M2 includes not only cash, demand deposits, and checking deposits that can be used like cash, but also money market funds (MMF), time deposits under two years, beneficiary certificates, negotiable certificates of deposit (CD), and repurchase agreements (RP), which are short-term financial products that can be easily converted into cash.

The M2 money supply decreased by 0.1% in March for the first time in three and a half years since September 2018, but then increased by 0.2% in one month and continued to rise last month and this month. However, the year-on-year growth rate was lower than the previous month (9.3%).

Looking at financial products, regular savings and time deposits increased by 22.5 trillion won, while money market funds (MMF, -10.2 trillion won) and checking savings deposits (-2.7 trillion won) decreased.

By economic agents, other financial institutions (-16.9 trillion won) decreased mainly due to MMF, whereas households and nonprofit organizations (+14.7 trillion won) increased centered on regular savings and time deposits amid rising interest rates and continued preference for safe assets.

In the case of other sectors (+6.4 trillion won), regular savings and time deposits increased mainly due to the inflow of fiscal funds such as support for small business owners.