The Fed Won't Have Its 2% CPI Wish So Long As M2 Growth Exceeds 2%
Price increases and decreases are a function of growing or shrinking the money supply (we use M2 to measure the money supply below).
Inflation used to mean growth in the money supply until the Fed changed the definition after the inflationary period of the late 1970s and early 1980s.
The Fed has grown M2 since March of 2024 and has grown M2 faster than 2% year-over-year since September 2024. Therefore, how can the Fed expect to have CPI at 2%?
