S. Korea's money supply growth slows to over 2-year low in Aug.

South Korea's money supply grew at the slowest annual pace in more than two years in August on eased growth of bank lending, the central bank said Wednesday.

South Korea's M2, a narrow measure of the money supply, rose3.9 percent to 1,888.7 trillion won ($1.76 trillion) in August from a year earlier, slowing from a 4.6 percent on-year gain in July, according to the Bank of Korea (BOK).

It marked the slowest growth since a 3.2 percent on-year advance in July 2011.

On a seasonally adjusted basis, the country's M2 fell 0.1 percent in August from the previous month, a turnaround from a 0.4 percent on-month gain in July.

The M2 covers currency in circulation and all types of deposits with a maturity of less than two years at lenders and non-banking financial institutions, excluding those held by insurers and brokerage houses.

The BOK said in a separate statement that the growth of South Korea's M2 is estimated to have picked up to the mid-4 percent range in September on foreigners' increased portfolio investment and larger bank lending.

South Korea's liquidity aggregate, the broadest measure of the money supply, grew 7.3 percent in August from a year earlier, up from a 6.8 percent on-year increase in July, it added.

The liquidity aggregate covers currency in circulation and all types of deposits at financial institutions, and state and corporate bonds.

The data came one day before the BOK is scheduled to hold its monthly rate-setting session. Analysts said that the BOK is likely to freeze the key rate at 2.5 percent for the fifth straight month in October. (Yonhap News)