| Actual | Previous | |
|---|---|---|
| Month over Month | -0.5% | -0.1% |
| Year over Year | -0.9% | 0.1% |
Highlights
UK broad money growth fell sharply in July, with M4 declining by 0.5 percent on the month following an unrevised 0.1 percent fall in June. That took the annual rate down to 0.9 percent, the biggest fall since February 2015.
The picture was a bit brighter after excluding intermediate other financial institutions, at least on a monthly basis. M4 registered no change on the month, but fell by an annual rate of 1.1 percent, the steepest decline since April.
Meanwhile, mortgage approvals dropped markedly. After a surprise uptick in June, permits declined to 49,444 from 54,606, the lowest level since February.
The latest Bank of England data suggest that the housing market will probably continue to soften, in line with anecdotal evidence, and add to the central bank's policy dilemma in September.
The picture was a bit brighter after excluding intermediate other financial institutions, at least on a monthly basis. M4 registered no change on the month, but fell by an annual rate of 1.1 percent, the steepest decline since April.
Meanwhile, mortgage approvals dropped markedly. After a surprise uptick in June, permits declined to 49,444 from 54,606, the lowest level since February.
The latest Bank of England data suggest that the housing market will probably continue to soften, in line with anecdotal evidence, and add to the central bank's policy dilemma in September.
Definition
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.
Description
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.
