A measure of
money supply used by the various
central banks. In the
Federal Reserve System, M2 includes all physical
currency and deposits in
checking accounts, and adds to this the amount of money in
savings accounts,
certificates of deposit up to $100,000 (or their equivalents), and
money market accounts. The
European Central Bank defines M2 as the aggregation currency in circulation, overnight deposits, deposits with maturities of up to two years, and deposits redeemable with notice of up to three months. The Japanese, Indian, and New Zealand central banks have definitions similar to (but not exactly the same as) the Federal Reserve's. While different
central banks have slightly different definitions of M2, all include money currently in circulation and the money most likely to come into circulation. Therefore, it is the most common measure used in forecasting
inflation. See also: M0,
M1,
M3, M4