Broad money (M3) expanded by Lm9.0 million, or 0.3 per cent, in September, pushing up its annual growth rate to 12.3 per cent from 11.7 per cent in the previous month. Additional lending to the non-bank private sector, coupled with an increase in the net foreign assets of the banking system, drove monetary growth during the month.

Narrow money (M1) declined marginally in September, falling by Lm0.1 million, as a drop in currency in circulation offset an increase in deposits withdrawable on demand. The latter was mainly driven by a rise in foreign currency holdings belonging to private non-financial companies and higher balances held by households denominated in Maltese lira. The annual rate of growth of M1 remained negative but accelerated to -1.8 per cent in September from -2.2 per cent in August.

Intermediate money (M2) increased by Lm9.0 million, or 0.3 per cent, in September, fuelled by growth in deposits with an agreed maturity of up to two years. The latter stemmed primarily from a rise in Maltese lira deposits belonging to insurance companies and households. Deposits redeemable at up to three months’ notice rose marginally during the month. Foreign currency deposits in M2 declined.

As regards the counterparts of M3, domestic credit expanded by Lm13.1 million, or 0.4 per cent, in September, as an increase in claims on other residents outweighed a drop in net claims on central government. Consequently, the annual rate of credit growth edged up to 13.4 per cent, from 13.2 per cent in August.

Claims on other residents increased by Lm39.9 million, or 1.5 per cent, boosted by the transfer of accrued interest to outstanding loans. Their annual rate of growth decelerated further, however, to 11.1 per cent. The monthly rise stemmed almost entirely from higher loans to the non-bank private sector, in particular, to households – mostly to finance house purchases – and to the wholesale and retail trade sector. Lending to the real estate, renting & business activities sector and to construction also increased significantly. At the same time, net claims on central government contracted by Lm26.8 million, or 6.0 per cent, mainly reflecting an increase in government deposits with the Central Bank of Malta and lower Treasury bill holdings by the rest of the banking system.

The net foreign assets of the banking system increased by Lm76.6 million, or 3.4 per cent, in September. As a result, on a year-on-year basis, they expanded by 11.3 per cent, as opposed to 8.7 per cent in August. The net foreign assets of the Central Bank of Malta increased by Lm22.6 million, or 2.6 per cent, in September as a result of temporary inflows related to the activities of companies engaged in international business operations. At the same time, net holdings belonging to the rest of the banking system grew by Lm54.0 million, or 4.0 per cent, boosted by a rise in revaluation reserves.

The other counterparts of M3 expanded by Lm80.6 million, or 4.5 per cent, in September, primarily as a result of a rise in revaluation reserves and the debiting of accrued interest referred to earlier.

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 with an 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.