Liberal Forum

The amount of money in the U.S. increased at the fastest clip since the summer of 2022 last month, the latest data showed. It isn’t necessarily good news.
 The money supply, as measured by M2, sums up the dollar bills, coins, and deposits held by the public at commercial banks and other institutions, as well as their balances in retail money-market funds and more. Data released by the Federal Reserve on Tuesday afternoon showed the total increased by 3.9% to kick off 2025.
 It was the largest year-over-year gain since July 2022.But M2 has been showing an improvement for months. The gauge bottomed out in April 2023, when it fell 4.63%, the biggest decline since the data series began in 1959. January’s report showed the 11th consecutive year-over-year increase.
 A problem with the rebound is that it leaves M2 at $21.56 trillion, $6.1 trillion more than before the pandemic and at levels not seen since mid-2022, the year the Fed began raising interest rates to rein in inflation. The abundance of cash in the economy could make it harder for the Fed to bring inflation back down to the bank’s 2% target.
 In prior statements, Chairman Jerome Powell has dismissed M2 as an indicator that doesn’t have important implications for economic growth. But other economists have argued that it generates reasonably good signals for the economy, suggesting there is enough liquidity sloshing around for consumers to spend and financial markets to rally.