Money Supply definition

Money supply figures, specifically M1, once were the most important release to watch in the Treasury market, as the Fed directly targeted M1 growth in the early 1980s. The focus on money supply has long since been abandoned, however. To the extent that money supply is still monitored by the market, M2 is the favoured monetary aggregate.

The Fed still targets both M2 and M3 in a rhetorical sense, but these targets mean little when it comes to policy decisions. If the Fed misses its target, it is more likely to change the target than it is to change policy. In 2000, the Fed finally abandoned the targets altogether, thereby removing any remaining emphasis on this one-time star release.

Related words

Money SupplyMoney MarketsMarket MakerMargin CallMarginMarket OrderMonetary ReserveMonetary PolicyMini-Forex AccountMine and YoursMajor PairsMutual FundMarket Capitalization