M4 expanded 0.4 percent on the month in April following an unrevised 0.3 percent increase in March. The pick-up came despite another soft performance by the key lending counterpart which was only flat at March's level. Annual M4 growth was 0.0 percent, up from minus 0.6 percent last time.
Excluding intermediate other financial corporations, the BoE's preferred measure, the picture was significantly stronger. Hence, adjusted broad money rose 0.5 percent on the month and was 4.2 percent higher on the year, a couple of ticks above its March rate. Similarly adjusted M4 lending was also more upbeat, recording a monthly gain of 0.2 percent for an annual increase of 2.6 percent, although this was three ticks short of its pace at the end of the first quarter.
Elsewhere in the monetary data mortgage approvals climbed to 68,076, their highest level since February 2014. With consumer credit (Stg1.173 billion) was also again firm, the general impression of today's statistics is of an ongoing improvement in UK financial conditions that bodes well for the durability of the current economic upswing.
M4 is the main broad measure of money supply in the UK. The central bank's preferred measure excludes economically irrelevant financial transactions.
M4 is similar to the M3 measure used in some other countries. M4 includes everything in M2 (also called the retail component of M4) plus other deposits with an original maturity of up to five years; other claims on financial institutions such as repos and bank acceptances; debt instruments issued by financial institutions including commercial paper and bonds with a maturity of up to five years. Understanding the role of money in the economy has always been an important issue for policymakers. And the pickup in broad money growth and decline in credit spreads over the past three years together with more recent financial market turbulence has made it a particularly pertinent issue. Monetary data can potentially provide important corroborative or incremental information about the outlook for inflation. Quantitative easing is essentially a policy aimed at boosting money supply.
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