The latest M4 data indicate a steadying of liquidity in the economy, with no change in November following a slight dip in October. Annual growth eased marginally from 3.0 percent to 2.9 percent, suggesting a slower pace of liquidity flow, which could temper inflationary pressures by moderating lending and investment activity.

When excluding intermediate and other financial corporations, M4 recorded a 0.1 percent month-over-month decline, the first drop since November 2023, though annual growth remained steady at a solid 3.4 percent. This subtle month-over-month contraction in monetary supply hints at a cooling financial sector and cautious lending behaviours, perhaps reflecting a more conservative economic environment likely aiming to balance growth with inflation control.

Overall, today's updates suggest a balancing act between moderating inflation and cautious economic activity, as slower money supply growth may temper lending, investment, and consumption while potentially stabilising financial conditions. Following the report, the RPI stands at minus 18 and the RPI-P at minus 27, indicating economic activities in general are well behind market expectations.

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.