M2 Money Supply

M2SL is the M2 Money Stock, seasonally adjusted, published monthly by the Federal Reserve. M2 includes currency, demand deposits (checking accounts), savings deposits, small-denomination time deposits, and money market mutual fund balances held by retail investors. It is a broad measure of liquid money in the US economy and a closely watched indicator of monetary conditions.

Why it matters: M2 growth and the money supply have a complex but historically meaningful relationship with inflation. The 2020-2021 M2 surge (+25% YoY at peak, the fastest since 1943) preceded the 2022 inflation spike; the 2023-2024 M2 contraction (the first sustained YoY decline since the Great Depression) preceded disinflation. While the Fed officially does not target money-supply aggregates, monetarist analysts and bond-market participants watch M2 closely. The post-2008 era complicated M2 interpretation (large excess reserves don't translate into M2 growth at the historical multiplier), but the 2020-2024 episode revived monetarist analysis.

M2 is at $22.7 trillion in March 2026 with YoY growth of approximately +4.6%, having recovered from the 2022-2023 contraction (YoY -4.5% trough in early 2023, the deepest decline since 1933). The current growth rate is in line with the 1990-2019 average of roughly 6% and well below the 2021 peak of +27%.

The recovery in M2 growth from negative territory has coincided with the Fed pause on QT and with bank lending stabilization. The current pace is consistent with sustainable nominal-GDP growth in the 4-5% range, broadly compatible with the Fed's 2% inflation target plus 2% real growth. The risk is M2 re-acceleration above 7-8% on a sustained basis, which historically has preceded inflation re-acceleration; the bull case for disinflation is M2 holding in the 4-6% range. Watch the H.6 monthly release for trend changes.

Modern M2 YoY range: -4.5% in early 2023 (the only sustained decline since the Great Depression), +27% in February 2021 (post-COVID stimulus peak, the fastest since 1943), +5.5% pre-COVID 2010-2019 average, +4.6% in April 2026. The drivers are bank-lending growth (the multiplier on bank reserves), Fed balance-sheet changes (QE creates deposits), Treasury operations (TGA flows shift money between government and bank-system accounts), and household saving versus spending behavior.

First, M2 YoY growth versus nominal GDP growth. Sustained M2 growth above nominal GDP signals excess liquidity; below signals tightening.

Second, M2 velocity (nominal GDP divided by M2). The post-COVID velocity collapse to ~1.1 (from 1.4 historically) has begun reversing; sustained velocity recovery would amplify any M2 growth into stronger nominal GDP.

Third, bank lending growth (FRED H.8 release). M2 expansion driven by bank lending is more inflationary than M2 expansion driven by Fed asset purchases.