ACTV - M2 Still Points To Lower Inflation

2024-04-26 04:20:00 ET

Summary

• The Fed recently released the March money supply numbers, and the story hasn't changed.
• M2 surged from early 2020 through early 2022, thanks to $6 trillion of deficit spending that was effectively monetized.
• The bulge in M2 rose to a high of $4.7 trillion in Dec. '21 and has now fallen by almost two-thirds which was the result of negative growth in M2 and ongoing growth in the economy.

The Fed recently released the March money supply numbers, and the story hasn't changed. M2 surged from early 2020 through early 2022, thanks to $6 trillion of deficit spending that was effectively monetized. Since its peak in April '22, M2 has declined by almost $1 trillion. This all adds up to the biggest seesaw in U.S. monetary history. As the dust continues to settle, we see that a lot of the excess growth in M2 has been absorbed by a bigger economy and suppressed by higher interest rates, which have boosted the public's willingness to hold on to the extra money. The question now is not whether inflation will rise, but rather how much further it will decline....

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