South Korea's money supply expanded at the slowest pace in six months in February amid eased growth in bank loans, the central bank said Thursday, lending support to prospects for a rate freeze.
The country's liquidity aggregate, the widest measure of the money supply, reached 2,568.1 trillion won (US$2.29 trillion) as of the end of February, up 10.2 percent from a year earlier, according to the Bank of Korea (BOK). The February reading was slightly down compared with a 10.6 percent on-year expansion in January and marked the slowest increase since August 2009 when the money supply grew 8.9 percent.
The liquidity aggregate, the broadest measure of the nation's money supply, covers currency in circulation, all types of deposits at financial institutions and state and corporate bonds.
The country's M2, a narrower measure of its money supply, grew 9.4 percent in February, compared with 9.3 percent the previous month.
The BOK said in a separate statement that the country's M2 is estimated to have grown in the low-9 percent range in March as the growth of bank lending was not brisk, overshadowing an increase in foreign stock investment.
The data, which came a day before the BOK's rate-review session, provides some relief to concerns over inflationary pressure and gives weight to prospects for a rate freeze in April.
The central bank is widely forecast to freeze the benchmark seven-day repo rate at a record low of 2 percent for the 14th consecutive month on Friday during the first rate-setting meeting to be chaired by the bank's new head.
BOK Gov. Kim Choong-soo, who took office last week, agreed with Finance Minister Yoon Jeung-hyun during a meeting on Monday to cooperate in pushing for economic and monetary policy measures, raising expectations that the key rate will be kept at an all-time low for some time.
The BOK slashed the rate by a combined 3.25 percentage points between October 2008 and February 2009 in a bid to boost the slumping economy.
Meanwhile, the finance ministry said that South Korea's economy remains on the road to recovery as production, domestic demand and other economic indicators point to a rebound from the global downturn.
But the government will stick to its current policy stance "for the time being" in order to accelerate an economic recovery, while maintaining job creation efforts and other measures aimed at stabilizing the livelihood of its people, the Ministry of Strategy and Finance said in a report that analyzes the nation's current economic conditions.
The report comes a day before the central bank holds a rate-setting meeting. The central bank froze its key rate at a record low of 2 percent for the 13th straight month in March after cutting it by a total of 3.25 percentage points between October 2008 and February 2009.
"Our economy sees a continued recovering trend drive by improving production, domestic demand, exports and employment. Inflation also remains stable," the report said. "In order to accelerate the pace of the recovery, we will stick to our policy stance for the time being, while keeping in place policy efforts to create jobs and stabilize the livelihood of ordinary people."
The ministry, however, cited debt problems in some European countries, conflict between the United States and China over trade imbalances and rising prices of crude oil and other raw materials as possible downside risks on South Korea's economy.
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