Graphiques de la semaine

United States: money supply losing steam

1 May 2022  
Céline Choulet  
United States: counterparts’ contributions to the annual growth rate of M2*  
QE1, QE2, QE  
Stabilisation of Fed Reduction of  
balance sheet Fed balance QE4 (Sept.19-  
Nov.14-Sept.17) sheet (Oct.17- Feb.22)  
Repo crisis,  
excluding retail money fund shares  
Other counterparts  
Non-monetary liabilities (inverted)  
Net external assets  
Holdings against central gov. (inverted)  
Claims on central government  
Credit to the private sector: Securities  
Annual growth rate of M2*  
Credit to the private sector: Loans  
Source: Federal Reserve, BNP Paribas calculations  
Over the past year, growth in the M2 measure of money supply in the USA has slowed from 27.1% y/y in February 2021 to 9.5% y/y in March  
022. This has mainly been due to the moderation in purchases, by the Federal Reserve (Fed) and banks, of Treasuries (blue bars) and mortgage-  
backed securities (MBS, hatched green bars). With the Fed having ended its net purchasing at the end of February 2022, the effect of QE was even  
smaller in Q1 2022. Since Q2 2021, the Fed’s repo arrangements with money market funds (light grey bars) have also resulted in the (temporary)  
destruction of money . Other factors have pulled in the opposite direction. The reduction in the Treasury’s holdings at the Fed (hatched blue bars),  
as it financed economic support packages, served to increase deposits with commercial banks. Depressed by a substantial comparison effect in  
021 (97% of outstanding guaranteed loans to enterprises issued in 2020 were forgiven in 2021), bank lending (green bars), the traditional engine  
of money creation, came back to life in Q1 2022.  
The normalisation of US monetary policy is likely to prolong this slowdown. On the one hand, the increase in policy interest rates could temporarily  
boost the attractiveness of the Fed’s reverse repo facility and of term deposits for bank customers. Meanwhile, the rapid tightening of monetary  
policy could weaken the credit channel. On the other hand, from 1 June, the Fed will stop fully reinvesting all maturing debt in its securities  
portfolio. Some non-banking entities will acquire newly issued Treasuries and MBS, thus reducing their deposits.  
Our methodology for identifying money supply counterparties is set out in Choulet (2021), Inside the money creation in the United States, Conjoncture, June 2021. In the chart, the estimate for Q1 2022 is  
provisional (the financial accounts for the US economy not yet having been published).  
The cash withdrawn from a household’s deposit account in order to subscribe to units in a money market fund is ‘loaned‘ on an overnight basis by the fund to the Fed rather than invested in debt securities,  
thus preventing it from circulating in the economy.  
Not included in the definition of money supply  
The bank  
for a changing  
The information and opinions contained in this report have been obtained from, or are based on,  
public sources believed to be reliable, but no representation or warranty, express or implied, is  
made that such information is accurate, complete or up to date and it should not be relied upon  
as such. This report does not constitute an offer or solicitation to buy or sell any securities or  
other investment. It does not constitute investment advice, nor financial research or analysis.  
Information and opinions contained in the report are not to be relied upon as authoritative or  
taken in substitution for the exercise of judgement by any recipient; they are subject to change  
without notice and not intended to provide the sole basis of any evaluation of the instruments  
discussed herein. Any reference to past performance should not be taken as an indication of  
future performance. To the fullest extent permitted by law, no BNP Paribas group company ac-  
cepts any liability whatsoever (including in negligence) for any direct or consequential loss ari-  
sing from any use of or reliance on material contained in this report. All estimates and opinions  
included in this report are made as of the date of this report. Unless otherwise indicated in this  
report there is no intention to update this report. BNP Paribas SA and its affiliates (collectively  
Structural or thematic topics.  
Analyses and forecasts for a selection of  
emerging economies.  
“BNP Paribas”) may make a market in, or may, as principal or agent, buy or sell securities of any  
issuer or person mentioned in this report or derivatives thereon. BNP Paribas may have a finan-  
cial interest in any issuer or person mentioned in this report, including a long or short position  
in their securities and/or options, futures or other derivative instruments based thereon. Prices,  
yields and other similar information included in this report are included for information pur-  
poses. Numerous factors will affect market pricing and there is no certainty that transactions  
could be executed at these prices. BNP Paribas, including its officers and employees may serve  
or have served as an officer, director or in an advisory capacity for any person mentioned in  
this report. BNP Paribas may, from time to time, solicit, perform or have performed investment  
banking, underwriting or other services (including acting as adviser, manager, underwriter or  
lender) within the last 12 months for any person referred to in this report. BNP Paribas may  
be a party to an agreement with any person relating to the production of this report. BNP Pa-  
ribas, may to the extent permitted by law, have acted upon or used the information contained  
herein, or the research or analysis on which it was based, before its publication. BNP Paribas  
may receive or intend to seek compensation for investment banking services in the next three  
months from or in relation to any person mentioned in this report. Any person mentioned in  
this report may have been provided with sections of this report prior to its publication in order  
to verify its factual accuracy.  
Analyses and forecasts with a focus on  
developed countries.  
Data releases, major economic events.  
BNP Paribas is incorporated in France with limited liability. Registered Office 16 Boulevard des  
Italiens, 75009 Paris. This report was produced by a BNP Paribas group company. This report is  
for the use of intended recipients and may not be reproduced (in whole or in part) or delivered  
or transmitted to any other person without the prior written consent of BNP Paribas. By accep-  
ting this document you agree to be bound by the foregoing limitations.  
Recent economic and policy developments,  
data comments, economic calendar, forecasts.  
Certain countries within the European Economic Area:  
This report has been approved for publication in the United Kingdom by BNP Paribas London  
Branch. BNP Paribas London Branch is authorised and supervised by the Autorité de Contrôle  
Prudentiel and authorised and subject to limited regulation by the Financial Services Authority.  
Details of the extent of our authorisation and regulation by the Financial Services Authority are  
available from us on request.  
This report has been approved for publication in France by BNP Paribas SA. BNP Paribas SA  
is incorporated in France with Limited Liability and is authorised by the Autorité de Contrôle  
Prudentiel (ACP) and regulated by the Autorité des Marchés Financiers (AMF). Its head office is  
16, boulevard des Italiens 75009 Paris, France.  
This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Pa-  
ribas Niederlassung Frankfurt am Main, a branch of BNP Paribas S.A. whose head office is in Pa-  
ris, France. BNP Paribas S.A. – Niederlassung Frankfurt am Main, Europa Allee 12, 60327 Frank-  
furt is authorised and supervised by the Autorité de Contrôle Prudentiel and it is authorised and  
subject to limited regulation by the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).  
United States: This report is being distributed to US persons by BNP Paribas Securities Corp.,  
or by a subsidiary or affiliate of BNP Paribas that is not registered as a US broker-dealer. BNP  
Paribas Securities Corp., a subsidiary of BNP Paribas, is a broker-dealer registered with the U.S.  
Securities and Exchange Commission and a member of the Financial Industry Regulatory Autho-  
rity and other principal exchanges. BNP Paribas Securities Corp. accepts responsibility for the  
content of a report prepared by another non-U.S. affiliate only when distributed to U.S. persons  
by BNP Paribas Securities Corp.  
Japan: This report is being distributed in Japan by BNP Paribas Securities (Japan) Limited or by  
a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan,  
to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and  
Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instru-  
ments firm registered according to the Financial Instruments and Exchange Law of Japan and  
a member of the Japan Securities Dealers Association and the Financial Futures Association of  
Japan. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report  
prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP  
Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not  
disclosed according to the Financial Instruments and Exchange Law of Japan.  
Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch,  
a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch  
is registered as a Licensed Bank under the Banking Ordinance and regulated by the Hong Kong  
Monetary Authority. BNP Paribas Hong Kong Branch is also a Registered Institution regulated  
by the Securities and Futures Commission for the conduct of Regulated Activity Types 1, 4 and 6  
under the Securities and Futures Ordinance.  
A monthly video with interviews of our  
A weekly video discussing the main event of  
the week.  
Our economic podcast.  
see the Economic Research website  
Some or all the information reported in this document may already have been published on  
BNP Paribas (2015). All rights reserved.  
Published by BNP PARIBAS Economic Research  
Head office: 16 boulevard des Italiens – 75009 Paris France / Phone : +33 (0)  
Internet: -  
Head of publication : Jean Lemierre / Chief editor: William De Vijlder  
The bank  
for a changing  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
Ce site présente leurs analyses.
Le site contient 1811 articles et 362 vidéos