Broad money growth was weak again in May. A 0.2 percent monthly expansion was only the second increase in the M4 since last October but, due to negative base effects, too small to prevent a decline in the annual growth rate, which fell from April's 0.3 percent to zero. Excluding intermediate other financial corporations, a 0.2 percent monthly decline put the yearly growth at a very subdued 0.7 percent.

M4 lending fell a monthly 0.1 percent, its fifth straight decline, and was only flat excluding intermediate other financial corporations. Elsewhere, mortgage approvals increased from 49,020 to 50,524 but home lending fell £0.092 billion after contracting by £1.466 billion in April. Overall consumer credit growth weakened in May (£1.144 billion after £1.513 billion).

M4 is the Bank of England's main broad measure of money supply. There is no target for M4 and in practice the central bank tends to follow an adjusted measure that excludes intermediate other financial corporations in order to get a handle on current underlying trends. The M4 private sector lending counterpart is the most closely watched aspect of the report.

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.