If you subtract M2SL - M1SL, the chart looks as follows:

enter image description here

The change is due to re-classification:

M1 before:

  • (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, and automatic transfer service, or ATS, accounts at depository institutions, share draft accounts at credit unions, and demand deposits at thrift institutions.

M1 after:

  • (3) other liquid deposits, consisting of OCDs and savings deposits (including money market deposit accounts).

M2 before:

  • (1) savings deposits (including money market deposit accounts);

M2 after:

  • (1) removed

Essentially savings deposits were moved from M2 to M1. Does it mean that M2 in the US now excludes all deposits regardless of term (e.g. a 10 year deposit or CD)? Is this because low interest rates reduced if not eliminated losses incurred from closing long-term deposits?


No, term deposits aren’t affected, it’s a change reflecting how often transfers can be made from savings accounts, which changed last April.

Per their announcements page:

As announced on December 17, 2020, the Board's Statistical Release H.6, "Money Stock Measures," will recognize savings deposits as a type of transaction account, starting with the publication today. This recognition reflects the Board's action on April 24, 2020, to remove the regulatory distinction between transaction accounts and savings deposits by deleting the six-per-month transfer limit on savings deposits in Regulation D. This change means that savings deposits have had a similar regulatory definition and the same liquidity characteristics as the transaction accounts reported as "Other checkable deposits" on the H.6 statistical release since the change to Regulation D. Consequently, today's H.6 statistical release combines release items "Savings deposits" and "Other checkable deposits" retroactively back to May 2020 and includes the resulting sum, reported as "Other liquid deposits," in the M1 monetary aggregate. This action increases the M1 monetary aggregate significantly while leaving the M2 monetary aggregate unchanged.

  • $\begingroup$ What about CDs, including short-term CDs? A 3-month CD that yields 0.05% p.a is as easily converted into cash as a transfer from a savings account. Which makes both of these instruments cash-like, and deserving of being treated as M1. $\endgroup$ – Sergei Rodionov Mar 4 at 14:17
  • $\begingroup$ Most CDs aren’t demandable without a penalty, so they’re excluded from narrow measures of money. $\endgroup$ – dismalscience Mar 4 at 19:13
  • $\begingroup$ Agreed, but the penalty is very small given that the interest on which the penalty is based is also very small. Even if the penalty kicks in before the first accrued interest, it's not a deterrent from redeeming the CD into cash. $\endgroup$ – Sergei Rodionov Mar 4 at 19:33
  • $\begingroup$ Yeah, that’s a reasonable point. Ultimately I think the case I’d make is that “not demandable at par” is a clean delineation, while a rate-based definition would have CDs moving back and forth between narrower and broader categories, which would be a lot more work to create a more muddled definition. That more muddled definition may even prove less useful, because the decision itself to hold money claims as a CD rather than in checking or savings likely implies a lower liquidity preference, even if the hurdle to redemption is low. $\endgroup$ – dismalscience Mar 4 at 19:45
  • $\begingroup$ Makes sense. Indeed the effort of allocating CDs to various money supply categories indeed would be too high. $\endgroup$ – Sergei Rodionov Mar 4 at 20:00

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