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Economy in Brief

U.S. Liquidity Growth Down
by Tom Moeller June 27, 2005

Liquidity growth in the US has slowed markedly this year versus the charged growth rates during the prior three years. Growth during the last three months in the adjusted monetary base fell to 1.2% versus 5.3% growth last year and 8.6% growth during 2002.

Contributing to this slowdown, if not causing it, has been the increase in the targeted interest rate for Fed funds to 3.0% from 1.0%.

Growth in MZM also has slowed to 0.8% during the last three months versus 3.9% during 2004 and 13.0% growth during 2002. The pickup in the most recent MZM growth rate from below zero may indicate continued life for consumer spending.

A Neutral Federal Funds Rate? from the Federal Reserve Bank of St. Louis can be found here.

Money Supply 6/22/05 (13 Week %, AR) Y/Y 2004 2003 2002
Adjusted Monetary Base 1.2% 4.4% 5.3% 6.3% 8.6%
MZM 0.8% 0.5% 3.9% 7.4% 13.0%
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