July 2010 Monetary Conditions Update

There’s lots of things to talk about this month, but I haven’t much time to go into detail just yet. So this will be short and sweet, until I can go over the numbers fully.

First news is that BNM has revamped the presentation of the Monthly Statistical Bulletin – there are a few new things in there such as extended coverage of the banking system, and a few losses like the full breakdown of the money supply aggregates.

But as far as the monetary numbers are concerned, what I’m seeing is basically a continuation of some of the trends we’ve been seeing in the past few months. Money supply growth has held steady in July (log annual and monthly changes; seasonally adjusted):

Note that both M1 and M2 are essentially flat compared to June.

On the interest rate front, the interbank market is full reflecting the raising of the OPR:

…while MGS yields continue to converge:

I prefer to think of this as a good sign – falling yields at the long end suggest a falling risk premium as well as lower inflationary expectations. It could also be a signal for slowing growth, and I’ll be the first to admit that that’s a strong possibility as well, but a lower term spread than implied by the current yield curve appears to be more “normal” under BNM’s floating rate regime.

I’ll cover developments in the banking sector in another post, and there’s also new 2Q numbers on Government finance to look at as well.

But at the moment, I don’t think there’s anything here to justify a further increase in the OPR – the Monetary Policy Committee is due to meet this Wednesday Thursday.