Over the last month and a half, the Fed has increased the monetary base (M0, the only measure of money supply it directly controls) by $151.40 billion. That is a sharp reversal after $267.7 billion in liquidity withdrawals from M0's all-time record in October and its average balances in January.
Why did the Fed do this?
The answer was given by the Fed's policy-setting committee, the FOMC, last week. In a quasi unanimous decision (with only one dissenting vote), the Fed's governors claimed that a slowing tempo of a long-overdue interest rate adjustment was warranted by a less optimistic growth outlook, and by their more confident view of price stability this year and next.
Some veteran European monetary officials will have a chuckle while reading that the Fed was also concerned about the slowing economic activity, and rising financial instability, in the rest of the world. This new cosmopolitan policy bent will probably strike them as a departure from what they always perceived as America's lack of interest in foreign economic developments.
America's economy is OK
How plausible are these Fed's concerns?