Historical High 1050 Trillion Won Supplied

The money supplied into open market reached historical high as low rate increased lending.

Currency authority strongly expressed the will to raise call rate for the stability of prices and collecting currency back, as M3, the monitoring indicator, exceeded the yearly target band.

According to the report that the Bank of Korea (BOK) submitted to Finance and Economy Committee of Congress on the 16th, the rising rate of M3 was slightly over 12 percent in March after 11.6 percent in January, which exceeded the maximum of the target band of 8 to 12 percent.

M3 in March was historical high 1050 trillion won. M3 is broadest measure of currency containing cash, demand deposit, saving deposit, money in trust, negotiable certificate of deposit, commercial bill, and accommodation bill.

And M1, which consists of cash and demand deposits, rose by 26.0 percent reaching 54 trillion won in March.

BOK blames the side effect of low rate, as family loans increased by 17 trillion and 400 billion won in the first quarter, which is 4.6 times as much as those in last year, and liquidity of open market caused large scale rising of real estate price.

At `Economy Vision 21 Forum` held at National Assembly, BOK Gov. Park Seung said, “The hike of call rate will not have much impact, as the current market interest rate already rose, and the time of rate increase will be within 3 months of the prediction of market. ”

BOK expressed on the 4th that `market should prepare the increase of interest rate` implying the rise of call rate (current 4.0 percent) by 0.25 to 0.50 percent point in May or June. Gov. Park said, “if BOK does not take any action, price increase will exceed 4 percent in the next year. ”

Sang-Chul Kim sckim007@donga.com