Money & Finance › The Fed, money supply & inflation › The money supply: M0, M1, M2 and M3
M3: broad money, no longer published
Discontinued March 2006· Concept
Fact, law or dataA rule, statute, definition or measured number.
The Fed's broadest money measure, which added big institutional cash pools to M2 until it was dropped in 2006.
See it on the Money & Finance map →How it works
M3 added to M2 the holdings of institutions and large savers: time deposits of $100,000 or more, institutional money market funds, repurchase agreements and Eurodollars (dollar deposits held abroad). The Fed stopped publishing it on March 23, 2006, saying it added little information beyond M2, was not used in policy, and cost money to collect. Other central banks still track broad measures; the European Central Bank's main aggregate is also called M3.
Why it matters
Its end marked the Fed's turn away from money targets toward interest rates. It also fueled suspicion that the Fed was hiding money creation, a claim without evidence.
Facts, rules and data
The Fed's November 2005 announcement and final March 2006 money-stock release (H.6); ECB data; private reconstructions by analysts.
Debates and risks
Whether wholesale money such as repo deserves its own measure gets revisited after each crisis; private estimates of US M3 vary widely.
Connections (2)
▸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.
▸M3: broad money, no longer published was the broadest official measure of The money supply: M0, M1, M2 and M3Fact, law or data
The connection
The Fed's measures nest like rings: M1 is currency and checking deposits; M2 adds savings, small CDs and retail money funds; M3 added institutional money. M0, the base, counts currency and bank reserves separately. Dropping M3 in 2006 left M2 as the broadest official US measure.
When and why
The Fed began publishing M1, M2 and M3 in 1971 and redefined them in 1980; M3 ended in March 2006.
How we know
The Fed's H.6 release history and its November 2005 notice explaining why M3 would end.
Debates and risks
Whether any money aggregate still predicts spending or inflation is debated; some economists prefer weighted 'Divisia' measures that count each asset by how money-like it is.