| Economic Calendar Terms |
Money supply figures, and M1 specifically, once were the most important release to watch in the Treasury market, as the Fed directly targetted M1 growth in the early 1980s. The focus on money supply has long since been abandoned, however. To the extent that money supply is still monitored by the market, M2 is the favored monetary aggregate. The Fed still targets both M2 and M3 in a rhetorical sense, but these targets mean little when it comes to policy decisions. If the Fed misses its target, it is more likely to change the target than it is to change policy. With M2 velocity behaving more predictably since 1994, however, some Federal Reserve policy makers are once again keeping an eye on M2. Intermediate and long term trends should therefore be noted, but volatile weekly swings are of little consequence to the market.
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