Broad money growth accelerated in October. A 0.6 percent rise on the month was the strongest since July and, at 0.2 percent, returned annual growth to positive territory for the first time in three months.
However, the pick-up masked a 0.2 percent monthly contraction in private sector lending although this was still enough to see yearly growth climb from minus 0.1 percent to 0.2 percent, its fastest rate since so far in 2015.
In fact, the underlying picture was, once again, rather more robust. Hence, a 0.4 percent monthly increase in M4 adjusted for intermediate other financial institutions followed a 0.7 percent gain in September and boosted annual growth to 4.5 percent, matching its most rapid pace since November 2013. Similarly adjusted lending edged up 0.1 percent versus September to stand 3.3 percent higher on the year after a 3.1 percent rise last time.
Meantime the housing market data were strong with mortgage lending (£3.629 billion) recording its largest increase since April 2008 and approvals up 1.1 percent at 69,630. Record low mortgage rates continue to underpin demand.
Today's financial statistics will ensure that the BoE MPC keep a very wary eye out for a possible bubble in house prices. However, otherwise there is nothing here to suggest that Bank Rate might be on the up anytime soon.
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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