Broad money (M3) increased by Lm30 million, or 1.0 per cent in August, with its annual growth rate edging up to 5.2 per cent from 5.1 per cent in July. Monetary growth stemmed from increased credit to the non-bank private sector and a rise in the net foreign assets of the banking system, the Central Bank said.

Narrow money (M1) contracted by Lm11 million, or 0.7 per cent, in August. Deposits withdrawable on demand accounted for most of the fall, shedding Lm8.4 million, or 0.7 per cent, mainly on account of a decline in Maltese lira deposits belonging to other financial intermediaries and financial auxiliaries that reversed the previous month’s rise. At the same time, currency in circulation dropped by Lm2.6 million, or 0.5 per cent.

As a result, the year-on-year rate of growth of M1 slowed down to 1.8 per cent in August from 3.3 per cent in July.

Despite the drop in M1, intermediate money (M2) expanded considerably as deposits with an agreed maturity of up to two years extended their upward trend, increasing by Lm40.9 million, or 2.9 per cent, in August. The latter was mainly fuelled by growth in households’ deposits denominated in Maltese lira. Deposits redeemable up to three months’ notice were stable.

As regards the counterparts of M3, domestic credit expanded by Lm8.2 million, or 0.3 per cent, in August. Its annual growth rate accelerated to 4.5 per cent from 3.9 per cent in July. Claims on other residents accounted for the entire increase, putting on Lm8.5 million, or 0.4 per cent, reflecting higher loans to the non-bank private sector. In particular, credit to households – primarily for house purchases – showed a notable increase. On the other hand, net claims on central government fell marginally, reflecting a drop in Malta Government Stocks held by banks.

The other major counterpart of broad money, the net foreign assets of the banking system, expanded by Lm12.2 million, or 0.6 per cent, in August. Their annual growth rate slowed down slightly to 21 per cent from 21.5 per cent in July. The net holdings of the Central Bank of Malta added Lm17.2 million, or 1.8 per cent, as a result of net purchases of foreign exchange from banks. Conversely, the net foreign assets held by the rest of the banking system declined by Lm5.1 million, or 0.5 per cent. A drop in the net holdings of deposit money banks, which mainly reflected the sale of foreign exchange to the bank, outweighed an increase in the net holdings of international banks.

The other counterparts of M3 contracted by Lm9.5 million, or 0.6 per cent, in August due to a rise in other assets, which was partly driven by interest due and unreceived on loans.

Definitions

•Narrow money (M1) includes currency in circulation, demand deposits and savings deposits withdrawable on demand.

•Intermediate money (M2) comprises M1, savings deposits redeemable at notice and time deposits within agreed maturity of up to and including two years.

•Broad money (M3) comprises M2, banks’ repurchase agreements with the non-bank sector and banks’ debt securities issued with an agreed maturity of up to and including two years.