Monetary Indicators Monitor (Oct.)

The growth rate of broad money has eased, as the Fed has wound down its asset purchases and expanded its reverse repo and term deposit facilities. As the Fed expands the use of those liquidity management tools, there will be an even bigger negative effect on broad money. This is to be expected, however, and should not be misinterpreted as a sign that the economic recovery is faltering. What matters is not broad money but bank loans, and the growth rate of the latter has continued to accelerate.