The Fed's Battle Continues ...

For some time now the Fed’s main focus has been to bring inflation down in the U.S. It feels like we have been talking about this topic forever and it is showing no real signs of changing any time soon.

The annual inflation rate in the US slowed for a ninth consecutive month in March to 5%, the lowest since May of 2021 from 6% in February, and below market forecasts of 5.2%. Food prices grew at a slower rate (8.5% vs 9.5% in February) and energy cost fell (-6.4% vs +5.2%), namely gasoline (-17.4%) and fuel oil (-14.2%). At the same time, prices for used cars and trucks declined once again (-11.6% vs -13.6%).

One of the tools at the Fed’s disposal in this battle with inflation is M2 Money supply.

M2 money supply is a measure of the money supply that includes all physical currency in circulation, such as coins and bills, plus various types of deposits held by individuals and businesses at financial institutions. These deposits include savings accounts, checking accounts, and other time deposits that can be easily converted into cash.