The modest 0.3 percent monthly rise in M4 liquidity during March signals a cautious but consistent uptick in monetary expansion, up slightly from February's 0.2 percent. Despite the slower annual growth of 3.4 percentdown from 3.9 percentthe underlying momentum remains steady, particularly when excluding intermediate financial institutions. In that adjusted view, a 0.4 percent monthly and 4.0 percent yearly rise suggests that households and non-financial firms are gradually fuelling economic activity through restrained consumption and investment. This deliberate pace helps sustain growth without triggering instability.

Lending data mirrors this balance. A 0.5 percent monthly growth in M4 lendingup from 0.2 percent in Februaryand 2.0 percent annual growth reflect growing credit confidence. Yet, removing intermediaries reveals a more stable core: 0.7 percent monthly and 3.6 percent annual lending increases indicate measured borrowing. This signals a prudent financial environment where risk-taking remains aligned with economic fundamentals.

Together, these trends suggest a liquidity landscape cautiously fuelling demand. While supportive of economic momentum, the steady climb also introduces inflationary risks that may require careful monetary calibration ahead.

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.