June Call Volume Increases by 18 Trillion Won Compared to Previous Month... Growth After 4 Months

Impact of Interest Rate Hike on Deposit Rates

In June, the money supply increased by 18 trillion won compared to the previous month, marking the first rise in four months. This was due to an influx of funds into savings and time deposits as deposit interest rates increased.

According to the 'June Money Supply and Liquidity' statistics released by the Bank of Korea on the 11th, the average broad money supply (M2 basis) in June was 3,803.3 trillion won, up 18 trillion won (0.5%) from the previous month. Compared to a year ago, it increased by 2.4%, showing a wider growth margin than the previous month (2.3%).

M2, which had decreased in January this year, rebounded by 0.3% in February, then declined by 0.2% in March, marking the first time since July-September 1999 that it showed a decline for three consecutive months.

The broad money supply indicator M2 includes cash, demand deposits, and checking deposits (all part of 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 quickly converted into cash.

By product, time deposits and installment savings increased by 9.5 trillion won from the previous month as banks raised deposit interest rates. Beneficiary certificates increased by 6.6 trillion won, mainly in equity and bond funds. On the other hand, money trusts (-4.3 trillion won) decreased due to increased corporate cash demand for managing financial ratios at the end of the quarter, and demand deposits (-2.9 trillion won) decreased due to fund transfers to time deposits and installment savings.

By economic agents, households and non-profit organizations increased their bank time deposits and installment savings by 5.1 trillion won, and other financial institutions increased beneficiary certificates by 400 billion won, while corporations (-1.2 trillion won) and other sectors (-100 billion won) saw decreases.

The narrow money supply M1, which includes only cash, demand deposits, and checking deposits, stood at 1,175.9 trillion won in June, down 3.4 trillion won from the previous month due to decreases in demand deposits and checking savings deposits. This marks the 13th consecutive month of decline since June last year.