BUSINESS US Fed's M2 money stock drops as worries about money shortage persist


US Fed's M2 money stock drops as worries about money shortage persist


13:31, December 13, 2019

WASHINGTON, Dec. 12 (Xinhua) -- Data released by the U.S. Federal Reserve (Fed) on Thursday showed that its M2 money stock decreased slightly for the week ending Dec. 2, as the U.S. money market worried about year-end shortage.


File photo: VCG

M2, the broad money supply, dropped to 15.3647 trillion U.S. dollars from the previous week's 15.3650 trillion dollars, while M1, the narrow money supply, also decreased from 3.9743 trillion dollars to 3.9721 trillion dollars.

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, a quick surge of money demand emerged in the U.S. money market, sending the interest rates in the market to nearly 10 percent.

As the year-end tax paying period approaches, U.S. banks and enterprises worried that the money shortage could storm the market once again, bringing negative impacts on U.S. economy.

The Fed has been pumping money into the market since September by providing repurchase agreements and buying securities to calm the market. According to the Fed, the central bank won't stop these actions until January, 2020.

"Temporary upward pressures on short-term money market rates are not unusual around year-end," Fed Chairman Jerome Powell said on Wednesday.

"We think that the pressures appear manageable," he added.

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