An increase in the nation’s money supply slowed last month, as foreign funds pulled out of Taiwan in pursuit of higher returns elsewhere after the US Federal Reserve raised interest rates, the central bank said yesterday.
The nation’s M1B and M2 money supply gauges gained 6.37 percent and 5.68 percent last month respectively from last year, indicating a slowdown from November last year due to a net fund outflow of NT$21.32 billion (US$634.11 million), the central bank said, adding that the corrections in local shares also weighed on the measures.
“The data suggest sufficient money supply for economic activity, despite monthly volatility,” central bank economic research department deputy director Wu Yih-Jiuan (吳懿娟) told reporters.
The money supply is the amount of money floating in the economy and available for spending. It is a crucial tool for policymakers to support and maintain a nation’s steady economic growth, with M1B referring to cash and cash equivalents and M2 including savings deposits, time-savings deposits, foreign currency deposits, mutual funds and M1B.
The Fed raised interest rates by 25 basis points last month, driving international funds to exit emerging economies, including Taiwan, where GDP growth took a hit due to a slowdown in China.
Foreign funds trimmed positions in local shares by net NT$27.46 billion last month and continue to do so this month amid an international equity rout.
As a result, foreign currency-based savings and time deposits shed, while securities account balances dropped, the bank said.
Still, there was a net fund inflow of US$1.37 billion for the whole of last year, the bank said.
Altogether, M2 grew 6.34 percent, falling within the bank’s target of between 2.5 percent and 6.5 percent, Wu said. The monetary policymaker has extended its target for this year.
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