The 1.3 percent monthly rise in M4 liquidity in January contrasts with December's near stagnation at 0.1 percent. The annual growth surge to 4.1 percent from 2.6 percent suggests a significant monetary expansion, which could inject momentum into lending and investment activity. A closer look at the data reveals a more measured expansion when excluding intermediate other financial corporations, with monthly M4 growth at 0.9 percent and annual growth at 4.2 percent. This implies that households and businesses support economic activity cautiously, reinforcing consumption and investment without excessive overheating.

The rebound in M4 lending, which rose 0.7 percent in January after a previous 0.7 percent decline, underscores a renewed appetite for borrowing. The year-over-year growth rate of 1.4 percentthe strongest in three monthssuggests a gradual recovery in credit demand. However, stripping out intermediate and other financial corporations, the moderate 0.3 percent monthly rise in lending highlights measured risk-taking, ensuring stability.

In essence, the liquid upturn presents opportunities and risks, fuelling economic activity while potentially igniting inflationary pressures. The latest update takes the UK RPI to 53 and the RPI-P to 46. This means that economic activities are generally ahead of market expectations in the UK economy.

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.