U.S. Fed’s M2 money stock rises as market bets on September rate cut

Xinhua News Agency | Aug 16, 2019 at 2:46 AM

WASHINGTON, Aug. 15 (Xinhua) -- Data released by the U.S. Federal Reserve (Fed) on Thursday showed that its M2 money stock increased for the week ending Aug. 5.

M2, the broad money supply, rose to 14.9408 trillion U.S. dollars from the previous week's 14.917 trillion dollars, while M1, the narrow money supply, increased from 3.8706 trillion dollars to 3.8825 trillion dollars in the same period.

Even though the money liquidity in the U.S. financial market was rising according to the Fed's report, and the central bank cut its benchmark interest rate by 25 basis points after concluding a two-day meeting on July 31 just as the market expected, the Fed said there's no guarantee for a series of cuts ahead.

However, after the White House said on Aug. 1 that the United States planned to impose more tariffs on Chinese imports, the financial market bet the Fed would lower the interest rate at its policy meeting on Sept. 17-18.

According to the Chicago Mercantile Exchange Group's FedWatch tool, the probability of a 25-basis-point rate cut on Fed's September meeting is close to 67 percent. Meanwhile, the market bet the probability of a 50-basis-point rate cut is over 33 percent.

M1 is commonly known as a measure of money supply, which includes cash and checking deposits. M2, the most critical indicator of money supply and inflation, includes all elements of M1 as well as savings deposits, money market securities, mutual funds, and other time deposits.