M4 expanded 0.5 percent on the month in May, its steepest gain since February 2014. Annual growth accelerated from a marginally higher revised 0.1 percent in April to 0.7 percent, also its best performance since early last year.
M4 lending advanced 0.3 percent versus the start of the quarter but annual growth held steady at a disappointingly soft minus 0.4 percent. More significantly, the BoE's preferred measure of M4 which excludes intermediate other financial corporations was up a monthly 0.3 percent, its seventh consecutive gain, to stand 4.4 percent above its year ago level. Similarly adjusted M4 lending was 0.1 percent firmer than in April and a still relatively sluggish 2.2 percent higher on the year.
Elsewhere in the financial data there were further signs of a cooling housing market with mortgage approvals weighing in at 64,434, down from 67,580 last time despite record low borrowing rates. Unsecured borrowing was broadly stable at Stg1.0 billion.
Overall today's figures point to little change in UK economic growth with some limited risks on the downside.
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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