(PatriotSpotlight.org) – The level of money circulating in the American economy has surged, achieving its highest level in over a year.
This speedy uptick in the so-called M2 money supply—which includes savings and cash deposits —hints at continued climbs in inflation going forward, heightening the concerns of both financial pundits and the American public. The fresh data shows that the money supply has soared by 0.8 percentage points in comparison to the same period last year. This is the inaugural year-over-year growth in money supply since the Federal Reserve started interest rate hikes back in 2022. In the wake of this new spike, the M2 money supply is now at its biggest zenith since March 2023.
In the recent six months, M2 has expanded three times, with four out of the past five weeks displaying growth. The consumer price index (CPI), which monitors changes in prices for consumer goods and services, climbed by 3.47 percent in March 2024 compared to the same month in 2023. This marks an acceleration from February’s 3.17 percent growth and is the most significant inflation rate since September 2022.
Traditionally, there are delays between shifts in money supplies and simultaneous shifts in inflation. While the precise timing of the lag is unclear, an increasing money supply suggests the potential for further inflationary issues in late 2024 or early 2025. This change could reshape the Federal Reserve’s plans for interest rates, possibly delaying any cuts or resulting in a reactionary hike.
M2 is currently 36 percent above its pre-2020 level but still 4 percentage points less than April 2022 peak. This uncertainty and fluctuations in the money supply raises questions regarding the effectiveness of the Federal Reserve’s agenda to rein in inflation and the broader ramifications on the American economic landscape. The recent surge in the money supply has made inflation a key issue, with potential ramifications for people across all professions. As stakeholders monitor the developments and risks, the Federal Reserve’s strategy is set to be keenly watched, especially given the potential impact on inflation levels and economic stability.
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