Money & Finance › The Fed, money supply & inflation › The money supply: M0, M1, M2 and M3
M2: cash, checking, savings and money market funds
· Concept
Fact, law or dataA rule, statute, definition or measured number.
M2 is the broad US money supply: cash, checking and savings deposits, small CDs and retail money market funds.
See it on the Money & Finance map →How it works
M2 equals M1 (cash, checking and savings) plus time deposits under $100,000 and retail money market fund shares. It stood at about $15.4 trillion in February 2020, jumped about 40% to roughly $21.7 trillion by mid-2022 on pandemic relief and Fed bond buying, then shrank about 4–5% into late 2023, its first year-over-year decline in records back to 1959. It passed $22 trillion in 2025.
Why it matters
Most economists treat it as the best single gauge of spendable money. Its 2020–22 surge preceded the inflation spike, renewing interest in it.
Facts, rules and data
Published monthly in the Fed's H.6 release and on FRED (series M2SL), with monthly data starting in 1959.
Debates and risks
M2 growth foreshadowed the 2021 inflation but failed as a signal in the decades before; whether it is reliable is debated.
Connections (5)
▸M1: cash and checking deposits (redefined 2020) is a subset of M2: cash, checking, savings and money market fundsFact, law or data
The connection
M2 starts with M1, the money ready to spend, and adds near-money: small CDs and retail money market funds. Since savings deposits moved into M1 in 2020, M1 has made up most of M2, more than 80% in 2025.
When and why
Defined by the Federal Reserve; the current framework dates from 1980, plus the May 2020 savings change.
How we know
A definition, published in the Fed's H.6 release, which lists every component.
Debates and risks
With the two measures now overlapping so heavily, economists question whether separating them still adds useful information.
▸M2: cash, checking, savings and money market funds is the headline measure of The money supply: M0, M1, M2 and M3Fact, law or data
The connection
M2 is what most analysts mean by 'the money supply': it captures money people use and keep for near-term spending. Since the Fed stopped publishing M3 in 2006, M2 has been the broadest official US measure.
When and why
The Fed's H.6 release; monthly data since 1959, about $22 trillion in late 2025.
How we know
Fed definitions and data, and its use as the standard money measure in research and market commentary.
Debates and risks
Whether M2 is the right gauge, or broader private measures such as Divisia money indexes are better, is debated by monetary economists.
▸M3: broad money, no longer published was a broader version of M2: cash, checking, savings and money market fundsFact, law or data
The connection
M3 started with everything in M2 and added larger, institutional pools: big time deposits, institutional money market funds, repurchase agreements and Eurodollars. M2 tracks household and small-business spending money; M3 also captured corporate and wholesale cash, which made it more volatile.
When and why
Defined in the Fed's money-stock reports; M3 was published until March 2006, and M2 is still published monthly.
How we know
Old H.6 releases list M3's components as M2 plus the institutional items.
Debates and risks
Whether ignoring wholesale money hid risks, such as the build-up of repo borrowing before 2008, is debated.
▸Velocity of money measures how fast people spend M2: cash, checking, savings and money market fundsFact, law or data
The connection
M2 velocity equals nominal GDP divided by M2: how many times each dollar of M2 is spent on final goods and services in a year. If M2 doubles but people spend it at half the pace, velocity halves and total spending is unchanged.
When and why
Calculated quarterly by the St. Louis Fed since 1959 from Commerce Department GDP data and the Fed's M2 figures.
How we know
The arithmetic is public (FRED series M2V); velocity fell to about 1.1 in 2020 when M2 surged while spending froze.
Debates and risks
Because velocity is backed out from GDP and M2 rather than observed, it explains little by itself; why it moves is the real question.
▸M2: cash, checking, savings and money market funds grew about 40% ahead of The 2021–23 inflation surgeFact, law or data
The connection
Relief checks and Fed bond buying put new money into bank accounts: M2 rose from about $15.4 trillion in February 2020 to about $21.7 trillion by mid-2022. Most of that rise came before prices took off in spring 2021. When spending returned, the extra money met limited supply, and prices rose.
When and why
United States, 2020–2022; M2 grew about 27% in the year to February 2021, the fastest in records back to 1959.
How we know
Fed H.6 money-stock data show the jump; CPI data show inflation rising roughly a year later, as monetarist economists had warned.
Debates and risks
M2 had failed as a signal for decades, and its 2022–23 shrinkage came with falling inflation. How much money growth, versus supply shocks, caused the surge is debated.