U.S. Fed's M2 money stock rises last week

Source: Xinhua | 2020-02-21

Data released by the U.S. Federal Reserve (Fed) on Thursday showed that its M2 money stock increased for the week ending Feb. 10, while M1 money stock decreased in the meantime.

M2, the broad money supply, rose to 15,508.6 billion U.S. dollars from the previous week's 15,489.7 billion dollars, while M1, the narrow money supply, dropped from 4,088.9 billion dollars to 4,028.3 billion dollars in the same period.

M1 is commonly known as a measure of money supply, which includes cash and checking deposits. M2, the most critical indicator of money supply and inflation, includes all elements of M1 as well as savings deposits, money market securities, mutual funds and other time deposits.

In September 2019, a quick surge of money demand emerged in the U.S. money market, sending the interest rates in the U.S. money market to nearly 10 percent, which was way over the level that the Fed feels comfortable with.

In order to stabilize money supply, the Fed had been pumping money into the market since September by providing repurchase agreements and buying securities. After months of operation, Fed policymakers thought their ongoing intervention in the U.S. market worked well, giving the central bank an opportunity to withdraw from intervention.

"As reserves approached durably ample levels, the need for sizable Treasury bill purchases and repo operations would diminish and that such operations could be gradually scaled back or phased out," the minutes of Fed's January policy meeting released on Wednesday showed.