M2 money supply explained: the broad measure of US money

By Ken Chigbo, Founder, KenMacro. Published 2026-05-12.

What is M2 money supply?

M2 is the Federal Reserve's broad measure of money supply in the US economy. The aggregate includes currency in circulation, demand deposits (checking accounts), savings deposits, small time deposits (under 100,000 dollars), and retail money market fund balances. M2 is published weekly with a one-week lag. The total stood at around 21 trillion US dollars in 2026. M2 growth was the dominant macro story of 2020-22, when COVID-era fiscal-monetary stimulus pushed M2 from 15 trillion to 22 trillion in 24 months (a 47 per cent rise). The subsequent contraction phase (M2 falling year-over-year through 2023, the first such decline since the 1930s) preceded the inflation peak and disinflation.

How traders use M2 money supply

Macro traders use M2 growth as a leading indicator of inflation pressure and asset-price liquidity. The structural relationship operates on 12 to 24 month lags; weekly M2 prints are too noisy to act on directly. A 12-month M2 growth rate above 8 per cent has historically preceded inflation episodes by 12 to 18 months. M2 contractions (negative year-over-year growth) have historically preceded recessions and disinflation. The 2020-22 M2 surge and the 2022-23 M2 contraction together produced the cleanest M2-inflation cycle since the 1970s. The desk references M2 trends when discussing the medium-term inflation regime, not for short-term trade signals. Direct M2 trading is limited; M2 informs positioning in inflation-sensitive assets like gold, TIPS, and long-duration equities.

Common misconceptions about M2

The first misconception is that M2 growth predicts inflation in real time. The relationship operates on 12 to 24 month lags, not weeks. The second is that M2 captures all relevant money. M2 excludes large time deposits, institutional money market funds, and Eurodollars; the broader M3 aggregate captures more (the Fed discontinued official M3 in 2006, though private estimates exist). The third is that quantitative easing always drives M2. QE expands the Fed's balance sheet and bank reserves, but M2 growth depends on bank lending behaviour. The 2010-19 QE era saw modest M2 growth because banks held reserves rather than lent them; the 2020-22 stimulus drove M2 directly through fiscal cheques and PPP loans.

Join the Macro Mastery desk

Frequently asked

Where can I see the M2 money supply?

M2 money supply is published weekly by the Federal Reserve on the H.6 statistical release, available free on the Federal Reserve website and on the FRED database maintained by the Federal Reserve Bank of St Louis. The KenMacro macro briefs reference current M2 levels and 12-month growth when relevant to the inflation regime.

What is the difference between M1 and M2?

M1 is the narrower money aggregate, including only currency in circulation and demand deposits (checking accounts). M2 includes everything in M1 plus savings deposits, small time deposits (under 100,000 dollars), and retail money market fund balances. M2 is the broader, more widely tracked aggregate for macro and inflation analysis.

Does M2 growth always cause inflation?

M2 growth has historically preceded inflation episodes on 12 to 24 month lags, but the relationship is conditional on bank-lending behaviour and on supply-side dynamics. The 2010-19 QE era saw weak M2 growth and persistent disinflation despite a large Fed balance sheet. The 2020-22 stimulus drove M2 directly and produced the largest inflation episode since the 1980s.

Educational analysis only. Past performance does not guarantee future results. Manage risk against your own portfolio.