M4 Lending and Retail Deposits
M4 lending and Liabilities to private sector have shown a negative growth rate since 2010.
M4 Growth has been much lower. If we exclude the impact of bond purchases, M4 growth has been negative.
This shows that banks have been reluctant to lend the extra reserves they gained from the Bank of England asset purchase scheme. It shows that underlying M4 money supply growth has been very low and at times negative.
To complicate matters, the UK saw a surge in headline inflation during 2011. CPI reaching 5.2%. However, this inflation was not caused by rapid growth in the money supply. It was caused by a combination of supply side factors, which caused a temporary blip.
- Higher import prices because of devaluation
- Impact of higher tax rates (e.g. VAT0
- Rising commodity prices, especially energy and oil.