Since 1980 the Federal Reserve’s broad money supply, M2, has grown 14.3 times over. The cost of a fixed middle-class basket has grown 5.22 times; official CPI 3.91. This page sets the three against each other, month by month, and asks the question everyone asks: when money is printed, how long until it shows up at the register — and does it always?
Three times as much money as prices. A dollar of M2 in 1980 has become 14.3 dollars; a dollar of the basket has become 5.22. The gap between the two lines is money that did not go into consumer prices — it went into house and stock prices, into bank reserves after 2008, and into a steady fall in how often each dollar changes hands. The ratio of the price level to the money level has fallen from 0.70 in 1999 to 0.35 today. Anyone who tells you the money supply is the inflation rate has to explain the 2010s, when M2 grew 6.0% a year and the basket grew 2.0%.
| Period | M2, per year | Reality Index, per year | Official CPI, per year |
|---|---|---|---|
| 1980–1990 | +7.7% | +5.4% | +4.7% |
| 1990–2000 | +4.0% | +2.6% | +2.8% |
| 2000–2008 | +6.3% | +4.1% | +2.8% |
| 2008–2019 | +6.0% | +2.0% | +1.6% |
| 2019–2025 | +6.7% | +5.4% | +3.9% |
The lag is real, and it is about a year and a half. Test every lag from zero to three years and the fit between money growth and later inflation peaks at 17 months (correlation +0.48 for the Reality Index, +0.49 for CPI); we use 18 months throughout. At that lag, each extra percentage point of M2 growth is followed by roughly +0.25 points of Reality Index inflation and +0.19 of CPI — the fixed basket answers money more than the substituting one does.
But the relationship only switches on when money growth is extreme. That is the finding this page exists to make. Cut the sample at the pandemic and the correlation disappears: from 1999 to 2019 it is +0.06. Money growth in its ordinary three-to-seven-percent range told you nothing about prices eighteen months out. Then M2 grew 26.6% in the year to February 2021, and 16 months later the Reality Index peaked at +11.5% (CPI at +9.1%). M2 then shrank 4.6% in the year to April 2023, the first contraction in the modern series, and inflation came down on the same clock. Over 2020–2026 the correlation is +0.75 and money explains 56% of the variation in the Reality Index.
| Sample | Months | RI corr. | RI pp per 1pp M2 | CPI corr. | CPI pp per 1pp M2 |
|---|---|---|---|---|---|
| 1999–2019 | 252 | +0.06 | +0.06 | -0.18 | -0.13 |
| 2020–2026 | 80 | +0.75 | +0.26 | +0.84 | +0.22 |
| 1999–2026 | 332 | +0.47 | +0.25 | +0.50 | +0.19 |
What it says about now. M2 grew +3.3% in the year to February 2025 — the money growth that, on this page’s clock, would be showing up in prices today. It is unremarkable. Today’s Reality Index reading of +4.33% is a fuel and housing story, not a money story, and the most recent M2 growth of +5.7% sits inside the range that has never, on its own, predicted anything. If that changes, this page will show it about a year and a half before the register does.
Reading the signal. Because prices answer money with a lag of about a year and a half, the money growth that will bear on prices through February 2028 has already happened. Run it through the fit above (Reality Index inflation = 2.0 + 0.25 × M2 growth 18 months earlier) and the line drifts from +2.8% now to +3.4% by February 2028 — a mild upward tilt as 2026’s faster money growth arrives. The band is ±2.1 points wide because that is how loose the relationship is outside extreme episodes; today’s actual reading sits above the line by roughly the fuel-and-housing gap described above. This is not a forecast of the Reality Index. It is a reading of one input, published so that if money growth ever spikes again, this line will move about eighteen months before the register does.
Why there is no “every $100 billion adds X% to prices” number here. We looked for one. It does not exist as a constant: $100 billion was 7% of M2 in 1980 and is 0.4% of it now, and the same percentage of money growth produced nothing in 2012 and a great deal in 2021. Any single figure would be true for one period and false for the rest.
M2 is the Federal Reserve’s H.6 release, not seasonally adjusted, monthly from 1959. In May 2020 the Fed reclassified savings deposits from M2-only into M1; M2 itself was unaffected, which is one reason this page uses M2 and not M1. Annual figures are averages of the twelve months. Prices are the Reality Index (annual from 1980; monthly from 1998 on the monthly index page) and CPI-U All Items, not seasonally adjusted, both on a 1980 base. The money signal is the same regression applied to M2 growth already observed, with no other inputs; it is refreshed with each monthly print. Lag analysis uses year-over-year rates, monthly, 1999 to August 2026; correlations and slopes are ordinary least squares with no other controls, which is deliberate — the point is what the raw relationship does and does not show. Nothing here is a forecast.