In September, the UK's broad money supply (M4) grew by 0.6 percent, up from 0.4 percent in August. Annually, M4 expanded by 3.6 percent, up from 3.4 percent in the previous month. While these headline figures suggest an expansion in money supply at an accelerating rate compared to the previous month, M4 excluding intermediate other financial corporations (OFCs), reveals a more encouraging trend over the year. It rose by 0.5 percent monthly and 4.4 percent annually, indicating that money held by households and non-financial businesses is still increasing steadily. This reflects ongoing support for consumption and investment, helping to underpin economic activity without generating inflationary pressure.

The lending landscape presents a similarly balanced picture. M4 lending rose by 0.8 percent in September, higher than August's 0.5 percent, while annual growth remained stable at 3.6 percent in September. However, lending growth excluding OFCs, considered a more accurate gauge of real-economy dynamics, grew 0.8 percent in the month (up from 0.4 percent the previous month), while it remained robust annually at 5.0 percent up from a revised 4.9 percent in August. This suggests that borrowing by households and non-financial firms is expanding at a measured pace, consistent with stable economic fundamentals. September's figures reflect an expanding and healthy financial environment, where monetary conditions support growth without amplifying systemic risk.

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.