Velocity of M2 Money Stock
M2V • Economic Data from Federal Reserve Economic Data (FRED)
Latest Value
1.39
Year-over-Year Change
16.39%
Date Range
1/1/1959 - 4/1/2025
Summary
The Velocity of M2 Money Stock measures how quickly money circulates through the economy, indicating the rate at which dollars are exchanged for goods and services. This metric provides crucial insights into economic activity, monetary policy effectiveness, and potential inflationary pressures.
Analysis & Context
This economic indicator provides valuable insights into current market conditions and economic trends. The data is updated regularly by the Federal Reserve and represents one of the most reliable sources for economic analysis.
Understanding this metric helps economists, policymakers, and investors make informed decisions about economic conditions and future trends. The interactive chart above allows you to explore historical patterns and identify key trends over time.
About This Dataset
Velocity represents the number of times a unit of currency is used to purchase goods and services within a specific time period, reflecting the overall economic dynamism. Economists interpret declining velocity as a sign of reduced economic activity or increased cash hoarding, while rising velocity can suggest increased economic confidence and spending.
Methodology
The Federal Reserve calculates M2V by dividing nominal GDP by the M2 money supply, tracking the frequency of money exchanges across the economy.
Historical Context
Policymakers and central bankers use this metric to assess monetary policy transmission, economic momentum, and potential inflationary or deflationary trends.
Key Facts
- Velocity has generally declined since the 2008 financial crisis
- Lower velocity can indicate reduced economic activity or increased cash retention
- The metric helps economists understand money supply and economic performance
FAQs
Q: What does a low M2V indicate?
A: A low velocity suggests reduced economic activity, with money circulating less frequently through the economy. This can signal lower consumer spending, investment hesitation, or economic uncertainty.
Q: How does M2V relate to inflation?
A: Lower money velocity can potentially counteract inflationary pressures by reducing the overall economic impact of money supply. Conversely, rapidly increasing velocity might signal potential inflationary risks.
Q: How often is M2V data updated?
A: The Federal Reserve typically updates M2V quarterly, providing a current snapshot of money circulation and economic dynamics. The data is part of broader monetary and economic reporting.
Q: Can M2V predict economic trends?
A: While not a definitive predictor, M2V offers valuable insights into economic momentum and potential future trends. Economists use it alongside other indicators to assess economic health.
Q: What are M2V's limitations?
A: M2V is a broad measure that doesn't capture sector-specific nuances or individual economic behaviors. It should be interpreted in conjunction with other economic indicators for comprehensive analysis.
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Citation
U.S. Federal Reserve, Velocity of M2 Money Stock [M2V], retrieved from FRED.
Last Checked: 8/1/2025