Seoul's money supply posts fastest growth in five years

Money supply in South Korea posted its fastest growth in five years in 2015 due to record low interest rates, central bank data showed on Monday.

The country's M2, or broad money, averaged 2,182 trillion won (about $1 trillion) in 2015, up 8.6 percent from a year earlier, according to the Bank of Korea (BOK). It was the highest increase in five years since 2010, Xinhua news agency reported.

The prolonged expansionary monetary policy maintained a large sum of money circulating in markets. The BOK cut its benchmark interest rate by 25 basis points in March and June 2015 each to an all-time low of 1.5 percent.

The bank lowered it by the same margin in August and October 2014 respectively.

The M1, dubbed as narrow money, averaged 636 trillion won in 2015, up 18.6 percent from the previous year. It was the fastest increase in 13 years.

The M1 covers currency in circulation, demand deposit and transferable savings deposit equivalent to cash. The M2 adds money market fund, money trust, time deposit and financial products that mature in less than two years to M1.

Outstanding currency in circulation averaged 70 trillion won last year, up 20.6 percent from a year ago. Demand deposits surged 23.6 percent, with transferable savings deposit jumping 16.4 percent.

Liquidity of financial institutions advanced 9.7 percent in 2015 from a year earlier. The on-year growth of liquidity aggregate, the broadcast measure of money supply, was 8.1 percent in 2015.