AFMC - Federal Reserve Watch: The Overall Monetary Picture

2024-07-07 04:41:16 ET

Summary

• Monetary policy is represented by a chart showing a 65.7% increase in the monetary base from February 2020 to May 2024.
• The M2 money stock has also increased in a similar pattern during this time period.
• The chart effectively illustrates the current state of monetary policy and the growth of the country's money stock.
• There is lots of money in the financial system despite the Fed's first round of quantitative tightening.

What picture do I think represents the state of monetary policy right now?

I think that this chart tells the story pretty well.

From February 2020 through May 2024, the monetary base, the foundation of the country's money stock has risen by 65.7 percent!

The M2 money stock has followed a somewhat similar path.

The "bulge" in the money stock was connected with some inflation.

Here the year-over-year mean PCE inflation rate topped out around 5.0 percent in late 2022 and has been dropping ever since....

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