Something for Your Espresso: Liquidity is increasing everywhere – just not within central banks

Morning from Copenhagen
Tech has come back into the limelight with markets chasing some sort of deal between the US and China on the Tech front, but arguably the most important thing at the moment in our opinion is to try to cut through all the Trump noise and look at how macro is actually developing beneath the surface.
We have been banging the drum on how the US economy was firing on all cylinders, and real-world liquidity (M2 adjusted for interbank reserves) increased a ton in 2024. Liquidity is increasing everywhere – just not within central banks – which is why a lot would say that liquidity is tight (and it is in central banks, but not on aggregate).
This is a clear reflationary sign in our opinion, and given the developments in the Cleveland Fed “New Rents” index yesterday, a softer shelter component might give Powell an excuse to cut into this, especially since he has mentioned this measure a couple of times already.
All of this reminds an awful lot about 2021 we must admit.
Chart 1.a: Liquidity is increasing everywhere – just not within central banks
Liquidity is flowing beyond central banks, creating a clear reflationary signal and fueling risk appetite. Cutting through the noise, the simultaneous rise in inflation, growth, and liquidity points to a powerful macroeconomic shift, with the Fed potentially adding fuel to the fire.
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