More recently, the uptick in M2 growth in 1998 seems to have been associated, in part, with the runup in equity prices, which raised household wealth relative to income and, as consequence, induced households to rebalance their portfolios. Here again, policymakers seem to have caught on quickly. Money growth accelerated to a rate above 10 percent in the first quarter of this year.
The recent jump in money growth is evident in chart 3 where I have plotted the three-month and two-year growth rates for M2 along with the reference value. There is, in general, too much noise, in my view, in the threemonth rate to make it useful for monitoring the monetary aggregates.