The nation’s money supply last month increased from September, reflecting continued increases in bank loans and investments, the central bank said in a statement yesterday.
M2, a broad measure of money supply, rose 7.28 percent last month from a year earlier, surpassing the central bank’s target range of 2.5 percent to 6.5 percent for the seventh consecutive month.
Hsu Chih-chiang (徐之強), an economics professor at National Central University, predicted that M2 growth would continue to surpass the central bank’s target in the coming months because of its relaxed monetary policy.
“The central bank is not likely to tighten credit anytime soon because it wants to see a solid sign of economic recovery to avoid a double-dip recession,” Hsu said by telephone yesterday.
Outstanding loans and investments by major financial institutions, including the postal savings system, totaled NT$21.08 trillion (US$654 billion) at the end of last month, down 1.1 percent from a year earlier, following a revised 1.28 percent drop in the previous month, the central bank said.
However, last month’s M2 annual growth was lower than the 8.28 percent recorded in September, which the central bank attributed to a higher comparison base in October last year, when it rose 4.09 percent year-on-year after growing 2.74 percent in September last year.
Growth also slowed because of smaller net portfolio inflow from foreigners last month, said Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup Taiwan Inc.
Citigroup was expecting M2 growth of 6.8 percent.
M1B money supply, which excludes time deposits, time savings deposits, foreign currency deposits and mutual funds, surged 25.7 percent last month from a year earlier, following a 23.5 percent rise in September, because of the continued shift of funds from time deposits to demand deposits, the bank said.
M1B growth last month represented the highest level since April 1989, central bank’s tallies showed.
“This was higher than our forecast of 24.1 percent year-on-year and is the fastest growth in two decades,” Cheng said in a client note.
The economist said he expected M1B growth to remain high through next September, when the central bank might start monetary tightening.
“Ample liquidity and loose monetary conditions will likely continue to support asset prices next year,” Cheng said.
For the first 10 months of the year, M2 grew 7.4 percent compared with the same period last year, while M1B increased 14 percent year-on-year.
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