The interest rate banks charge each other for overnight loans eased closer to a record low as May wrapped up on Friday, but the move is unlikely to prompt U.S. Federal Reserve action unless it stays at the lower level.
Yesterday’s GDP report was great with real GDP growing at a 6.4% annualized pace.
To get 6.4% annualized GDP growth, The Federal Reserve had to print a massive amount of money. Even with a great GDP report (preliminary), M1 money velocity is at a historic low. In other words, the US economy got relatively little for all the money it is printing.
Things improved if we look at the broader definition of money, M2. Again, despite the excellent real GDP report, M2 velocity for Q1 actually declined since The Fed went ballistic printing money. Again, the bang for the buck, so to speak, is near the historic low.
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