Broad money (M3) rose by Lm4.3 million, or 0.1%, in October, the Central Bank said. Nonetheless, its
annual growth rate slowed down to 11.6% from 12.3% in the previous month. An
increase in net claims on central government was the main factor driving monetary
growth during the month.
Narrow money (M1) declined by Lm27.2 million, or 1.7%, in October, as a sizeable
drop in currency in circulation was coupled with a reduction in deposits withdrawable
on demand. While the former reflected falling demand for cash in the face of the
imminent euro changeover, the latter was mainly driven by a contraction in Maltese
lira balances belonging to non-financial companies. Consequently, the annual growth
rate of M1 fell to -3.8% in October from -1.8% in September.
Intermediate money (M2) increased by Lm4.3 million, or 0.1%, in October, as
deposits with an agreed maturity of up to two years expanded by Lm30.3 million. The
latter stemmed primarily from a rise in Maltese lira deposits belonging to households
and insurance companies. Deposits redeemable at up to three months' notice also
rose during the month. However, foreign currency deposits classified under M2
declined.
As regards the counterparts of M3, domestic credit expanded by Lm46.4 million, or
1.5%, in October. Nevertheless, the annual rate of credit growth slowed down
slightly, falling to 13.2% from 13.4% in September. After having contracted in the
previous month, net claims on central government expanded by Lm40.3 million, or
9.6%, mainly reflecting increased bank holdings of Treasury bills and Malta
Government stocks. The latter followed primary market developments, with credit
institutions taking up slightly more than half of the amount issued in October. The
rise in claims on other residents was mainly attributable to increased credit to
households - mostly to finance house purchases - and to the construction sector. In
contrast, lending to the wholesale & retail trade sector and to the hotels & restaurants
sector fell. As a result, the annual rate of growth of credit to other residents continued
to moderate, falling to 10.4% from 11.1% in September.
The net foreign assets of the banking system contracted by Lm4.1 million, or 0.2%, in
October. As a result, their annual rate of growth dropped to 10.1%, as opposed to
11.2% in September. The net foreign assets of the Central Bank of Malta declined by
Lm21.4 million, or 2.4%, mostly due to the reversal of temporary inflows associated
with the operations of companies engaged in international business. The net holdings
2
belonging to the rest of the banking system, however, expanded by Lm17.3 million,
or 1.2%, boosted by growth in revaluation reserves and retained earnings.
The other counterparts of M3 expanded by Lm38.0 million, or 2.0%, in October,
driven primarily by the rise in revaluation reserves and the increase in retained
earnings mentioned above.

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.
Further economic and monetary information can be obtained from the website of the
Central Bank of Malta www.centralbankmalta.com