The Maltese contribution to the euro area broad money stock (M3) increased by €3 million in July, reaching €8,607.3 million, the Central Bank said.

In its comments on the July monetary statistics, it said that, on an annual basis, this contribution contracted by 0.9 per cent as opposed to the slight pick-up of 0.2 per cent recorded during the 12 months to June.

The narrow money (M1) component increased by €68.4 million, or 1.7 per cent, in July, driven by a rise in overnight deposits.

The latter grew by €64.1 million, or 1.8 per cent, mostly on account of higher balances belonging to Maltese private non-financial companies and households.

Overnight deposits belonging to other euro area residents rose slightly. Meanwhile, currency issued expanded by €4.4 million, or 0.7 per cent. This notwithstanding, the annual rate of growth of M1 decelerated to 7.1 per cent from 7.7 per cent in June.

Despite the rise in M1, the intermediate money (M2) component contracted by €7.1 million, or 0.1 per cent, in July following a considerable decline in short-term deposits.

In particular, deposits with an agreed maturity of up to two years fell by €75.7 million, or 1.7 per cent.

Within this category, local residents’ deposits dropped by €31.6 million, as balances belonging to households declined. As a result, the year-on-year growth rate of deposits with an agreed maturity up to two years belonging to Maltese residents fell further, reaching -6.2 per cent in July, from -5.6 per cent one month earlier. Meanwhile, deposits redeemable at up to three months’ notice rose marginally.

On aggregate, deposits belonging to Maltese residents expanded by €29.6 million in July. Nevertheless, their annual growth rate decelerated to 0.2 per cent from 0.8 per cent in June.

As in recent months, there was a significant shift from short-term deposits belonging to resident households into overnight deposits as well as deposits with maturities exceeding two years, which do not form part of M3.

While the shift into overnight deposits reflected the fall in the opportunity cost of holding the most liquid monetary assets in the prevailing environment of extremely low interest rates, products with longer-term maturities offered at higher rates also proved attractive.

Growth in residents’ deposits may also have been dampened by the issue of corporate securities on the primary market.

Meanwhile, credit to residents expanded by €50.2 million in July. Lending to government rose by €27.2 million, or 1.5 per cent, as MFI holdings of government stocks increased.

At the same time, credit to other Maltese residents grew by €23 million, or 0.3 per cent, mainly owing to additional loans taken up by households, mostly to finance house purchases, and by the real estate, renting and business activities sector.

Bank lending to the electricity, gas and water supply sector and the transport, storage and communications sector also increased notably.

In contrast, loans to the wholesale and retail trade sector and to the construction sector declined.

Overall, the annual rate of growth of credit to Maltese residents slowed down to 10.2 per cent from 11.8 per cent in June.

At the same time, credit to residents of other euro area member states declined by €169 million, contracting by €118.8 million in July.

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