Money Supply Growth
Money supply growth measures the rate at which the total amount of money in an economy increases over a given period.
Meaning in Practice
Money supply growth is typically calculated using monetary aggregates such as M1, M2, or M3. It reflects changes in bank lending, central bank operations, and liquidity conditions. The data is usually reported monthly by central banks or statistical agencies.
Why It Matters
Rapid money supply growth can signal rising inflationary pressures, while slow growth may indicate tightening financial conditions. Policymakers monitor it to assess liquidity and credit dynamics. It plays a role in medium-term price stability analysis.
Market Impact
Accelerating money growth may raise inflation expectations and bond yields. Slower growth can support expectations of looser policy or weaker economic momentum. Currency markets react depending on perceived policy implications.
Example
If M2 expands by 8 percent year-over-year, it indicates an increase in overall liquidity within the economy.