Explaining the difference between the growth of M4 deposits and M4 lending

Quarterly Bulletin 2001 Q2
Published on 01 June 2001

By John Power and Peter Andrews of the Bank’s Monetary Assessment and Strategy Division.

The growth of sterling lending by UK monetary financial institutions to the UK private sector has substantially exceeded the growth of UK private sector sterling deposits over the past two years. This article considers the possible influence on this growth differential of two events in the past financial year: the unexpected extent of the Government’s cash surplus; and the assumption by the Debt Management Office of responsibility for government cash management. The article also describes how the gap between sterling lending and deposits was financed over the past two years.

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