Broad money continued to expand in February and at easily its fastest rate in the last few years. A 0.9 percent monthly increase followed a marginally stronger revised 0.1 percent rise in January and lifted annual M4 growth from 0.8 percent to 2.0 percent. M4 lending was up a respectable 0.8 percent versus January and 2.4 percent on the year after a 1.5 percent increase last time.
Meantime, excluding intermediate other financial corporations the picture was also quite upbeat. Hence, adjusted M4 rose 0.5 percent on the month to raise its yearly rate from 4.0 percent to 4.5 percent, its best performance since November. Similarly adjusted lending expanded a robust 1.1 percent from its January level and now shows an annualised quarterly increase of fully 8.0 percent.
Elsewhere in the financial data mortgage approvals slipped a little from January's 2-year high of 74,085 to 73,871 last month and net mortgage lending rose Stg3.648 billion after a Stg3.743 billion advance last time. Average mortgage rates hit a new record low (2.95 percent).
All in all today's financial figures are pleasantly firm. The BoE's Financial Policy Committee (FPC) has already warned lenders to the buy-to-let market to tighten standards so the dip in February mortgage approvals and lending will not be unwelcome. Otherwise, signs of faster borrowing may come as something of a relief as it indicates that the economic recovery probably remains broadly on track.
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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