The M2 money supply increased to $ 21.5 billion in December, just less than its historical maximum.
The M2 money supply measures the total amount of money in circulation within an economy, including liquid and less liquid assets. Meanwhile, the CPI index tracks the average price change of goods and services over time, which indicates inflation.
Continuous growth in the M2 money supply is an upward indicator for risk assets, since it indicates that more liquidity is being entered into the system, which is generally first found in risk assets.
The M2 money supply has registered a new monthly maximum every month since January 2024. M2 money supply influences the CPI by affecting inflation trends. While the Federal Reserve is actively adjusting through quantitative flexibility and maintaining the Fed funds rate at a high level while trying to reduce the CPI to its inflation target of 2%, the money supply M2 continues to grow.
