BUSINESS US Fed's M2 money stock drops last week


US Fed's M2 money stock drops last week


14:45, February 14, 2020


File photo: CGTN

WASHINGTON, Feb. 13 (Xinhua) -- Data released by the U.S. Federal Reserve (Fed) on Thursday showed that its M2 money stock decreased for the week ending Feb. 3, while M1 money stock increased in the meantime.

M2, the broad money supply, dropped to 15.4898 trillion U.S. dollars from the previous week's 15.4947 trillion dollars, while M1, the narrow money supply, rose from 3.9677 trillion dollars to 4.0889 trillion 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. 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 intervention, Federal Reserve Chairman Jerome Powell said on Wednesday that the U.S. central bank planned to reduce its repo operations since the money demand of the market participants would be met in the coming month.

"As our bill purchases continue to build reserves toward levels that maintain ample conditions, we intend to gradually transition away from the active use of repo operations," Powell said.

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