US M2 Money Supply Sees Fastest Growth in Three Years Amid Inflation Concerns

The US M2 money supply grew at its fastest pace in three years, rising by 5.4% year over year in July, according to data from YCharts.

This expansion has sparked concerns about inflation, which remains a concern for the Federal Reserve despite cooling slightly from its peak of 9% in 2022.

The M2 money supply includes cash in circulation, as well as funds in banks earning higher interest rates, and is seen by some economists as a leading indicator of inflation due to its potential to drive demand and prices.

Former Fed Chair Jerome Powell has expressed skepticism about the importance of M2 in predicting inflation, stating that 'the classic relationship no longer holds' five years ago. However, current Fed Chair Kevin Warsh has mentioned M2 as a way to measure the stock of money, suggesting it could be a useful indicator.