SEOUL: South Korea’s money supply experienced a slight increase in August, even as the central bank maintained a restrictive monetary policy stance, according to recent data from the Bank of Korea.
According to Yonhap News Agency, the country’s M2 money supply index, which includes cash, demand deposits, and easily convertible financial instruments, reached 4,062.6 trillion won (approximately US$2.975 trillion) in August, marking a 0.2 percent rise from July. This increment comes amid a series of interest rate hikes aimed at controlling inflation within the nation. From April 2022 to January 2023, the Bank of Korea executed seven consecutive rate increases, bringing the key interest rate to a peak to combat inflation pressures in Asia’s fourth-largest economy.
However, earlier in the month, the Bank of Korea adjusted its course by reducing the key interest rate by a quarter percentage point to 3.25 percent. This move, which concluded its prolonged period of restrictive monetary policy, was prompted by signs
of moderating inflation and weakening domestic demand, indicating a shift in focus towards supporting economic growth.
The M2 figure is a critical measure for economists and policymakers as it provides insight into the amount of money circulating within the economy and the potential for future inflation or economic activity. The recent data suggests a cautious approach by the central bank in navigating between controlling inflation and bolstering economic stability.