Other deposits with the RBI (primarily deposits from banks and financial institutions). As per the recent data from the Federal Reserve Bank of St. Louis,  M3 for the United States up till May 2022 was 21.75 trillion. However, it has increased as it was measured at around 20.41 in May 2021. As per world bank data, the global m3 money supply stands at 143.5% of GDP. M3 is the sum of M2 plus repurchase agreements, money market fund shares/units, and debt securities with a maturity of up to two years. It is also known as broad money and reflects the entire economy’s money supply.

In the United Kingdom, deposit money outweighs the central bank issued currency by a factor of more than 30 to 1. In the United States, where the country’s currency has a special international role being used in many transactions around the world, legally as well as illegally, the ratio is still more than 8 to 1. Commercial banks create money whenever they make a loan and simultaneously create a matching deposit in the borrower’s bank account. In return, money is destroyed when the borrower pays back the principal on the loan. Movements in the money supply therefore to a large extent depend on the decisions of commercial banks to supply loans and consequently deposits, and the public’s behavior in demanding currency as well as bank deposits. These decisions are influenced by the monetary policy of central banks, so that money supply is ultimately created by complex interactions between banks, non-banks and central banks.

Currency Strength

This data indicates the rate at which the total money supply is growing or shrinking compared to the same period in the previous year. Index providing insights into India’s economic phases and growth outlook. The 1 Finance Macroeconomic Index determines the growth of the economy. The predictions of a U.S. economic slowdown we discussed in 2021 have largely materialized over the past few years. The latest government data confirmed that second-quarter GDP for 2025 grew by a sluggish 0.8% on an annualized basis.

Money Supply M1 by Country Comparison

• The predictions of a U.S. economic slowdown we discussed in 2021 have largely materialized over the past few years.
• Access comprehensive financial data with unmatched coverage and precision.
• Economists analyze the money supply and develop policies revolving around it through controlling interest rates and increasing or decreasing the amount of money flowing in the economy.
• This made a money target less useful for central banks and led to the decline of money supply as a tool of monetary policy.

This also causes the price of such securities to rise due to the increased demand, and interest rates to fall. In contrast, when the central bank “tightens” the money supply, it sells securities on the open market, drawing liquid funds out of the banking system. The prices of such securities fall as supply is increased, and interest rates rise. In macroeconomics, money supply (or money stock) refers to the total volume of money held by the public at a particular point in time. There are several ways to define “money”, but standard measures usually include currency in circulation (i.e. physical cash) and demand deposits (depositors’ easily accessed assets on the books of financial institutions).

Even though today central banks generally do not try to determine the money supply, monitoring money supply data may still play a role in the preparation of monetary policy as part of a wide array of financial and economic data that policymakers review. Developments in money supply may contain information of the behavior of commercial banks and of the general economic stance which is useful for judging future movements in, say, employment and inflation. Also in this respect, however, money supply data have a mixed record. This made a money target less useful for central banks and led to the decline of money supply as a tool of monetary policy.

New Monetary Aggregates

M0 is referred to as the “wide monetary base” or “narrow money” and M4 is referred to as “broad money” or simply “the money supply”. M1 is total of currency notes and coins (CU)+ net demand deposits issued (DD) Time deposits (included in M3) are a significant source of funds for banks. By tracking changes in these deposits, analysts can gauge the health and stability of the banking sector.

Risk analysis

Demand deposits with the banking system (savings and current accounts). However, RBI measures it in a bit different way by using M1 and other components. The M3 money supply is a broad money aggregate that reflects the economy’s money supply. There are three metrics of the money supply, known as “money aggregates,” which are M1, M2, and M3 money supply.

Price

In making monetary policy choices, the Fed does not take M3 into account. m3 money supply india Also, exclusive less liquid components of M3 did not appear to transmit additional economic information already captured by the more liquid components of M2. Compare changes in M3 with inflation rates to understand the relationship between money supply and price level changes.

Market Analysis

The M3 Money Supply includes banknotes and coins in circulation, funds on settlement and current bank accounts, demand and savings deposits, institutional money market funds, repurchase agreements and debt securities. If, for example, only the savings interest rate changes, M1 and M2 are redistributed, but M3 remains constant. There are several different definitions of money supply to reflect the differing stores of money. Owing to the nature of bank deposits, especially time-restricted savings account deposits, M4 represents the most illiquid measure of money. India’s sovereign credit ratings were raised to ‘BBB’ from ‘BBB-‘, with a ‘stable’ outlook.

Banking Operations

• Third, increasing liquidity in the banking system due to the conversion of commercial banks’ illiquid securities into deposits at the central bank.
• As per them, in a free-floating fiat money economy like the United States, money creation would not raise prices.
• Monitors repo rate trends to understand economic phases and monetary policy stance.
• As per world bank data, the global m3 money supply stands at 143.5% of GDP.
• Either way, the equation in itself is an identity which is true by definition rather than describing economic behavior.

Due to the increasing demand, the price of such assets rises, and interest rates fall. Commercial banks may now lend these sums because of the multiplier effect of fractional-reserve banking, which causes the value of bank deposits and loans to rise many times over the initial investment. There is some empirical evidence of a direct relationship between the growth of the money supply and long-term price inflation, at least for rapid increases in the amount of money in the economy. The quantity theory was a cornerstone for the monetarists and in particular Milton Friedman, who together with Anna Schwartz in 1963 in a pioneering work documented the relationship between money and inflation in the United States during the period 1867–1960.

Current alternate sources of M3 data are available from the private sector. Monetary aggregates provide valuable insights into the money supply dynamics of an economy, guiding policymakers’ decisions and influencing economic variables. As financial systems evolve and economies become more interconnected, the accurate measurement and analysis of monetary aggregates continue to be crucial for maintaining monetary stability and achieving sustainable economic growth. These measures help the RBI assess the amount of money circulating in the economy and implement monetary policy to control inflation, manage interest rates, and ensure economic stability. Evaluate the effectiveness of monetary policy measures taken by the central bank in response to changes in M3, especially in terms of controlling inflation and stimulating economic growth. It helps in decisions related to interest rates, liquidity management, and controlling inflation.

In practice, macroeconomists almost always use real GDP to define Q, omitting the role of all other transactions. Either way, the equation in itself is an identity which is true by definition rather than describing economic behavior. That is, velocity is defined by the values of the other three variables. Unlike the other terms, the velocity of money has no independent measure and can only be estimated by dividing PQ by M. Adherents of the quantity theory of money assume that the velocity of money is stable and predictable, being determined mostly by financial institutions.

Our Platform offers the most reliable macroeconomic data and advanced analytical tools. According to recent Reserve Bank of India (RBI) data, the uncertainty caused by the Covid-19 pandemic has led to a surge in money supply. The level of broad money can reflect consumer confidence, spending habits, and savings trends within the economy.