July Transaction Volume Increases by 10 Trillion Won... Deposits and Savings Rise by 21.6 Trillion Won as Interest Rates Climb

(Data provided by Bank of Korea)

As deposit interest rates rise and preference for safe assets strengthens, the money supply increased by more than 10 trillion won in July.

According to the 'Money and Liquidity' statistics released by the Bank of Korea on the 16th, the average broad money supply (M2 basis) in July was 3,719.5 trillion won, an increase of 10.4 trillion won (0.3%) compared to the previous month.

The broad money supply indicator M2 includes cash, demand deposits, and checking deposits (all M1), as well as money market funds (MMF), time deposits under two years, installment savings, beneficiary certificates, negotiable certificates of deposit (CD), repurchase agreements (RP), financial bonds under two years, and money trusts under two years?short-term financial products that can be immediately converted into cash.

Due to rising interest rates and preference for safe assets, time deposits and installment savings increased significantly by 21.6 trillion won, while transaction deposits such as checking savings deposits (-9.3 trillion won) and demand deposits (-5 trillion won) decreased.

By sector, households and nonprofit organizations (10.1 trillion won) increased mainly in time deposits and installment savings, and companies (3.4 trillion won) turned to an increase as time deposits, installment savings, and foreign currency deposits rose.

Other financial institutions decreased by 6.2 trillion won due to temporary redemptions of MMFs and money trusts.

The year-on-year growth rate of M2 (in original series, average balance basis) was 8.0%, down from 8.8% in the previous month.

The narrow money supply M1 averaged 1,362.3 trillion won in July, down 1.0% from the previous month. This is the first decline in seven months since December last year (-0.02%). The year-on-year growth rate was 5.3%, continuing the downward trend since February last year (26.0%).