Sat, Feb 26, 2011 - Page 12 News List

M1B, M2 money supply growth surged last month

HOLIDAY DEMAND:Aside from the seasonal effect, increased lending by banks and growth in investments contributed to the rise in money supply

By Amy Su  /  Staff Reporter

M1B and M2 money supply growth rebounded last month as market demand for capital surged ahead of the Lunar New Year holiday, the central bank said yesterday.

M1B, a narrow measure of money supply indicating capital momentum in the stock market, rebounded for the first time since December 2009, central bank data showed.

It rose 9.35 percent from a year ago, compared with an 8.77 percent year-on-year increase in December, the bank said.

“Currency in circulation rose last month as market demand for capital typically rises before the Lunar New Year holiday,” Chen E-dawn (陳一端), deputy chief of the bank’s economic research department, told a media briefing.

Increased lending by banks and rising investments also boosted liquidity and growth in the M1B, she said.

The broader M2 monetary gauge, which includes M1B, time deposits, time savings deposits, foreign currency deposits and mutual funds, increased 5.59 percent year-on-year last month, up 0.45 percentage points from December, central bank data showed.

The balance of loans for construction hit a record-high of NT$1.3 trillion (US$43.7 billion) last month, compared with NT$1.29 trillion in December.

However, growth in construction loans is gradually slowing, Chen said, attributing it to the central bank’s efforts to rein in housing prices.

Foreign-held New Taiwan dollar deposits amounted to NT$264.3 billion, up NT$41.4 billion from July, indicating that the amount of money ready to enter the stock market is abundant, Chen said.

Faced with rising raw material prices, the central bank will continue to adjust liquidity to stave off inflationary risks, she said.

Seasonally adjusted, the M1B grew 8.95 percent from a year earlier last month, while the M2 rose 5.49 percent year-on-year, central bank data showed.

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