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No. Fed policy has been to increase the price of money or interest rates in hopes of reducing demand in the economy to combat inflation because it makes borrowi
by bubbleRefuge 3y ago
No. Fed policy has been to increase the price of money or interest rates in hopes of reducing demand in the economy to combat inflation because it makes borrowing more expensive to borrowers.
- dragontamer 3y agoWhich does... What to M2? It causes M2 to drop, and M2 includes savings account balances and MMFs (so it cannot be explained with "Oh, people just moved money to MMFs", because Savings+MMFs is dropping in general)
- s1artibartfast 3y agoM2 does not include institutional money market funds. This excludes pension fund, mutual fund company, bank, insurance company, or any other large institution.
- dragontamer 3y agoYou're right in that I've overgeneralized my statement earlier. But I argue my point still stands. https://fred.stlouisfed.org/series/WRMFNS https://fred.stlouisfed.org/series/WRMFNS Retail component of money market funds remains part of M2. Meaning that if depositors switched their money to VMFXX (or other retail money market funds), then it'd still be part of M2.