Bank of England

Wednesday, May 2, 2012 - 04:56

Update 2: BOE: M4 Hits Record Low; Non-Residents Sell Gilts

--Adds Detail To Version Transmitted At 0848 GMT

London (MNI) - Broad money growth hit a record low in March and non-residents were net sellers of Gilts, Bank of England data published Wednesday showed.

The M4 broad money measure fell 0.8% on the month in March to stand down 5.0% on the year. The 5% decline was the weakest outturn since the series began in 1964 but much of the weakness was due to a decline in intra-financial sector transactions and stripping these out broad money growth was relatively firm.

The Bank of England's favoured measure of broad money growth, M4 ex-intermediate other financial corporations, which excludes economically irrelevant intra-financial sector transactions, saw 6.4% growth on a one quarter/three month annualised basis and 2.7% growth on a four quarter/12 monthly rate.

The 6.4% growth rate for M4 ex-IOFCs was last higher in Q4 2007.

Bank of England Governor Mervyn King has highlighted the weakness of money growth as one reason for his belief above target inflation outturns will not prove sustainable. These latest data, however, highlight the problems of getting a clear picture from the diverse money measures.

The BOE Bankstats data showed that, while the central bank continued with bulk purchases of Gilts in March through quantitative easing, foreign institutions were net sellers.

Non-resident net purchases of Gilts declined by Stg1.73 billion following a Stg4.659 billion decline in February. Back in January, non-residents were buyers, purchasing a net Stg9.414 billion.

--Data Show Subdued Housing Market Activity

The BOE data also showed subdued activity in the housing market. The number of mortgage approvals rose to 49,860 in March from 49,029 in February and the net change in secured lending was Stg0.966 billion, just up from Stg0.958 billion in February.

Nevertheless, mortgage approvals were well down on the levels seen in late 2011 and early 2012, hitting a local peak of 57,954 in January this year.

Net consumer credit rose Stg419 million in March, up from Stg285 million in February.

The data were stronger than analysts had expected, with mortgage approvals exceeding the 48,800 median forecast and consumer credit above the Stg300 million prediction.

Among the raft of data issued by the BOE Wednesday, its effective interest rates release showed borrowing costs rising for new borrowers.

The effective new secured loan rate rose in March by 14 basis points on the month to 3.64%. The effective rate on the stock of outstanding secured loans fell marginally, by 1 basis point to 3.32%.

The rate on unsecured personal loans rose by 13 basis points to 7.49%, although the new unsecured personal loan rate fell by 26 basis points to 6.88%.

Analysts have raised concerns over effective monetary tightening at a time when the BOE Monetary Policy has left policy unchanged, and these figures do show some borrowing costs rising.

--London newsroom: 4420 7862 7491 e-mail:


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