In response to an unanticipated movement in spending and hence the quantity of money demanded, a small variation in interest rates would be sufficient to bring money back to path but not to correct the deviation in spending. As a consequence, by late 1982, M1 was de-emphasized and policy decisions per force became more discretionary.
However, in recognition of the longer-run relationship of prices and M2, especially its stable long-term velocity, this broader aggregate was accorded more weight, along with a variety of other indicators, in setting our policy stance. As an indicator, M2 served us well for a number of years.