Money supply expands 14.9 percent, fuels inflation
Money supply is surging amid soaring inflation, which is set to further add to inflationary concerns.
Funds in the market, which find no investment targets, are flocking to short-term products, including money market funds.
According to the “trends of money and liquidity indicators for April,” which was released by the Bank of Korea on Wednesday, M2 money (outstanding balance), a measure of currency in circulation including time deposits and installment deposits with less than two-year maturity, increased to 1339.4349 trillion won, up 14.9 percent on year.
The April M2 growth rate is the highest figure since June 1996, when it posted 16.1 percent. The M2 growth rate has continued to increase since January, when it recorded 12.5 percent.
The Bank of Korea predicts the M2 growth rate will expand around 15 percent in May, higher than the April figure, as bank lending has been on a steady rise.
A BOK official said, “The money supply has increased due to expanding household loans, including mortgage loans, and corporate loans.”
Some economists say the steady growth of money supply will add to inflationary concerns. Money supply growth is one key factor for inflationary pressure along with surging international oil prices and soaring exchange rates.
Meanwhile, market funds are seen to be moving into short-term products, including MMFs, en masse. MMFs are a great channel for standby funds awaiting investments, since real interest rates have turned negative.
According to the “financial market trend for May,” released by the central bank, MMFs expanded 10.9 trillion won in May. The figure is the highest since the bank began tallying the data.
In contrast, fund inflows into banks have slowed.
By Kim Kyu-sung /mirror@fnnews.com
According to the Bank of Korea on wednesday, M2 money(outstanding balance) indicators increased to 1339.4349 trillion won, up 14.9 percent on year.
The bank of Korea predicts the M2 growth rate will expand around 15 % in may as bank lending has been on a steady rise.
Market funds(including MMFs) are seen to be moving into short-term products. And MMFs expanded 10.9 trillion won in may. But Fund inflows into banks have slowed.
The Bank of Korea said that the money supply continously increased since January 2008, and the indicator is recorded second hightest.
The reason of the increasing money supply is by fuels inflation. But by making money, the price index will be increased and the Won's value will be go down. These phenomenon would generate serious problem and richs will be richer and poor will be poorer. The president of Korea, Myung Bak Lee said that he will increase the Korea's economy about 7%, but if the M2 supply increase countinously
20200041 kwon hyuck sung
