The rate of money growth is a matter of concern because, as Milton Friedman aptly stated, “inflation is always and everywhere a monetary phenomenon.” Sweep-adjusted M1 growth appears to have slowed slightly last year (5.6% through November 1998, compared to 6.1% in 1997). Yet, compared to GDP growth, even this lower level is problematic. Although data on sweep-adjusted M1 growth since November are not yet available, non-sweep-adjusted M1 fell 6.2% from November to December, much slower than its 1.6% average increase in 1998. Unless sweep activity spurted in December, sweep-adjusted M1 also is likely to show sharply slower growth. The broader monetary aggregates, however, showed significantly higher growth levels in 1998 than did these narrower aggregates.
Suggested citation: "Monetary Policy," Federal Reserve Bank of Cleveland, Economic Trends, no. 99-02, pp. 02-05, 02.01.1999.