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DJ UK PRESS: Note Demand May Distort Money Supply -ECB Study(Comtex Business Via Thomson Dialog NewsEdge)DOW JONES NEWSWIRES Apr 12, 2006 (Dow Jones Commodities News Select via Comtex) --Internet banking and unexpectedly strong demand for euro notes, especially EUR500 notes, may be distorting money supply data, according to a European Central Bank study, The Financial Times reported on its Web site Wednesday. Demand for euro notes has continued to grow apace, even four years after the switch from national currencies in the 12-country eurozone, the ECB reported in its monthly bulletin on Wednesday. Currency in circulation grew at an annual rate of 13.6% in February. The ECB study gave no reasons for the strong growth but noted that it was "higher than what could have been expected on the basis of developments in the euro area legacy currencies prior to the changeover," according to the report. One explanation could be that low interest rates have reduced incentives to pay cash into bank accounts, according to The Financial Times. The rapid growth in EUR500 notes - the largest denomination available - suggests individuals are hoarding cash. But criminal activities could also explain the demand. Separate ECB figures showed that the number of outstanding EUR500 notes rose by 22% last year, after 28% growth the previous year. Such trends are significant because currency in circulation has accounted for much of the growth in M1, the narrow money-supply measure, the report said. This in turn has been the main contributor in recent years to growth in M3, the broader money-supply measure watched closely by the ECB. Another factor behind M1 growth, the bulletin article suggests, is the growth of internet accounts, the report said. (END) Dow Jones Newswires 04-12-06 1455ET |